fossil-free within one generation...report of the management board vattenfall nv annual report 2019...

Vattenfall N.V. Annual Report 2019

Fossil-freewithin onegeneration

Vattenfall NV Annual Report 2019 2

Table of contentsReport of the Management Board: 3• About Vattenfall NV 3• Our beliefs about the future 3• Changing regulatory framework 4 • Strategy 5 • Operational performance 7 • Financial performance 12• Business risks and risk management 14• Outlook and challenges 16• Composition of the Management and Supervisory Board 17 Financial Statements: 18• Consolidated accounts 19• Notes to the consolidated accounts 24• Company accounts 51• Notes to the company accounts 52

Other Information: 58• Independent auditor’s report 58• Assurance report of the independent auditor 61• Declaration of Compliance with the Code of Conduct

for Suppliers and Metering companies operating under their responsibility 63

• Annual Statement 2019 in the framework of the Heat Act 64• Profit appropriation 67

Table of contents


Report of the Management Board

About Vattenfall NVVattenfall AB is one of Europe’s largest producers and

retailers of electricity and heat. Vattenfall’s main markets

are Sweden, Germany, the Netherlands, Denmark, and

the UK. The Group has approximately 20,000 employees.

The Parent Company, Vattenfall AB, is 100% owned by the

Swedish state, and its headquarters are located in Solna,

Sweden. Vattenfall is organised in six cross-border Business

Areas: Heat, Wind, Customers & Solutions, Generation,

Markets and Distribution. In the Netherlands Vattenfall

is mainly active in the Business Areas: Heat, Wind and

Customers & Solutions.

In 2018 it was decided that all main activities of Vattenfall

will be executed under one brand. As part of that decision a

rebranding strategy for Nuon was started. In 2019, the Nuon

brand was migrated from Nuon to Vattenfall. As part of this

rebranding strategy, the legal name of N.V. Nuon Energy

(‘Nuon’) was changed to Vattenfall N.V. (‘Vattenfall NV’) on 5

March 2019.

Vattenfall’s operations in the Netherlands are carried out

by Vattenfall NV and its subsidiaries. Vattenfall NV also

operates one gas storage facility located in Germany.

Vattenfall NV produces and supplies electricity, gas,

heat and cooling, offering its customers a wide range of

energy-saving products and services. Vattenfall NV has

approximately 3,600 employees (FTEs) and more than

2 million customers in the Netherlands. With net sales

reaching EUR 2.8 billion in 2019, Vattenfall NV holds

a top-three position in the Dutch energy market. The

activities relating to market access, trading and power plant

optimisation are centralised in one central Continental

hub in Hamburg. The activities that serve and support

Vattenfall NV’s power plants and gas portfolio optimisation

are also handled in Hamburg, but are executed on behalf of

Vattenfall NV.

In March 2019 Vattenfall acquired DELTA Energie B.V.,

strengthening Vattenfall's position in the Netherlands with

its green profile and a strong loyal customer base. As a

result, the activities are consolidated in Vattenfall NV as of

March 2019.

With the acquisition of Dutch energy services company

Senfal B.V., new services have been added for large

industrial customers with the aim of unlocking value

through flexibility and optimisation of renewable generation.

Through its services, Senfal is able to substantially reduce

the energy bill for large industrial companies and realise

substantial improvements in power trading profits for wind

and solar farms as well as battery owners.

Vattenfall AB has committed itself to the Swedish

Corporate Governance Code (SCGC). Within the Vattenfall

Group focus on the SCGC is therefore emphasised. More

information about Vattenfall can be found in the 2019

Annual and sustainability report of Vattenfall AB and can be

found at www.vattenfall.com. As part of Vattenfall, Vattenfall

NV’s financial and sustainability results are included in

this Vattenfall report. More detailed information about

Vattenfall’s work with sustainability is also available at

https://group.vattenfall.com/who-we-are/sustainability.

Our beliefs about the future As part of Vattenfall, we are determined to enable fossil-free

living within one generation. To succeed we must become

fossil-free ourselves. But that is not enough. We are looking

beyond our own industry to see where we can really make

a difference. Together with our partners, we are taking

on the responsibility to find new and sustainable ways to

electrify transportation, industries and heating. Vattenfall

NV is passionate to contribute to this transformation of

the energy sector and drive the development to reduce

our dependence on fossil fuels. Our beliefs underpin our

strategy and represent our view of what is necessary to

ensure Vattenfall’s success given the overall context in

which we operate.

Sustainability is the business – and a prerequisite for access to customers, competence and investorsCustomers want to reduce their carbon footprint and seek

to do so by engaging with companies with similar values

of environmental and social responsibility. Employees are

driven more than ever to seek companies with strong

values where they feel they can have a positive impact

on society. Likewise, investors are increasingly integrating

sustainability into their decision-making and moving away

from investments that link them to fossil fuels. Businesses

viewed as forward-thinking and sustainable will be able

to leverage stakeholder expectations to their benefit,

gaining an edge in the competition for talent, easier

access to capital, and more opportunities to form strategic

partnerships.

To best serve the needs of customers, a total energy perspective is necessary Customers are becoming increasingly sophisticated as

they progressively adopt decentralised solutions like heat



pumps, solar power, e-mobility, energy storage, and smart

devices. However, customers are not always equipped to

optimise the interplay between the various technologies

and thus seek simple, integrated solutions that do not

require them to be experts. Companies that can provide

simple solutions that truly focus on customer needs by

effectively leveraging their expertise across the full energy

value chain will have a strong competitive advantage.

Electrification is a key enabler of fossil-free living and, given the pace required, demand for fossil-free electricity and distribution infrastructure will increase significantlyElectrification represents an opportunity to reduce carbon

emissions in the transportation, heating and industrial

sectors. The key driver for electrification is a combination

of cost efficiency and sustainability, and demand for

low-cost, fossil-free electricity will increase as a result.

This will also place additional demand on electricity

networks, creating the need for further investments in

expansion and modernisation of networks. Suppliers of

fossil-free electricity and heat, as well as the respective

network operators, will play an increasingly important role

in the work to combat climate change.

Digitalisation of the entire energy value chain is required to leverage flexibility and serve customers in a fossil-free, robust and cost-efficient energy systemAs renewable resources increase and industries electrify,

it is necessary to better leverage existing infrastructure

and the potential for flexibility in order to continue to create

a fossil-free, robust and cost-efficient energy system. In

addition, customers expect instant information and access

as smartphone applications and internet-based solutions

are the main interface for customer service and interaction.

This means that further digitalisation of the energy value

chain is needed, including the ability to gather and make

sense of large amounts of real-time data to forecast

demand, to perform predictive maintenance and remotely

steer devices, along with sound data management

practices and smooth customer interfaces.

New competences, speed in learning and diverse and inclusive teams are critical in the energy transitionNew skill sets and competences will constantly be required

as our industry transitions into new ways of interacting

with customers, technology and society. Speed in learning

and the ability to adapt to new ways of working will be

important competitive advantages and enable the delivery

of new products and more efficient processes. Company

cultures that are inclusive to diverse points of view will be

critical to foster this learning environment and attract and

retain talent.

Cost efficiency and competitiveness are prerequisites for value creation and growthIncreased competition in both core and new businesses

puts pressure on margins, necessitating a focus on both

cost efficiency and competitiveness in order to deliver

value. Improving efficiency throughout the value chain

will play a significant role. Efficient operations require high

utilisation of people and assets, lean and digital processes

and high cost awareness.

Changing regulatory frameworkPolitical pressure to align the regulatory framework with

the needed changes to become fossil free and comply to

the Paris agreement have been intensified in 2019. This

happened both on a national and on a European scale. The

following summarises key regulatory trends at EU scale and

nationally.

Climate Act and Dutch Climate Agreement - In 2019, a

legally binding Climate Act, with focus on carbon-neutral

power production by 2050 was established. In addition,

a non-binding societal Climate Agreement, with a 2030

greenhouse gas reduction target of 49% compared to

1990, was concluded. These agreements should result in

a total of more than 84 TWh renewable power production,

2 million zero-emission passenger cars, and 1.5 million

households switching from natural gas to sustainable

energy sources for heating and cooking. Electrification

of industry, including carbon capture and storage (CCS),

will be incentivised via subsidies and a national CO2 tax.

By 2030, hydrogen technology should be built out as

an important energy carrier in several sectors. Vattenfall

has committed itself to contribute to the goal of the

Climate Agreement and to the implementation of relevant

agreements and actions.

National ban on coal for power production -

The utilisation of hard coal for power production is

prohibited as per 1 January 2020, which led to the closing

of Vattenfall’s only coal-fired power plant in the Netherlands,

Hemweg 8, in December 2019. The four remaining coal-

fired power plants in the Netherlands are given a transition

period until 1 January 2030, at the latest.

National minimum CO2 price for power production - As

per 1 January 2020, a national minimum CO2 price is

introduced for power production. power production. The

price path (2020-2030) is currently below the prognosed

EU ETS price. The national minimum CO2 price could

however have impact on the profitability of our gas-fired

plants in the future. On the other hand, the minimum

price provides some additional certainty for financing of

sustainable projects.



Gas production from the Groningen field to stop by

the end of 2022 - The government decided to stop gas

production from the Groningen field in 2022, instead of

2030, providing a push for the development of fossil-free

heating. The use of natural gas from other fields will still

be possible and allowed.

Urgenda verdict holds at Supreme Court - The original

ruling of the verdict of The Hague District Court in 2015

remained unaffected at the supreme court. This means that

there is no escape anymore for the Dutch government, but

to do anything they can to reduce the Dutch CO2 emissions

by 25% in 2020. Given the delay in following the original

verdict, this is expected to become a very difficult if not

almost impossible task. Following the Urgenda verdict,

the Dutch government seeks for new ways to reduce

Dutch CO2 emissions. It is expected to be very difficult

to implement measures that can realistically close the

multi-megaton gap that is still in place. It is expected to

be too late and very costly to close down all remaining

coal-fired plants and by changing coal for subsidised

biomass we are facing both public and political opposition.

Nitrogen reduction ordered by Court - The Dutch Council

of State ordered the government to reduce the emissions

of nitrogen. The existing regulation violates EU law and

should therefore be adapted. There is no easy or quick

fix. Some proposed measures include reduction of the

maximum speed on highways, dietary change for cattle and

a voluntary arrangement for farmers to reduce their scale/

stop. We are monitoring our construction sites with regards

to this regulation.

European Commission presents New Green Deal - In

December 2019, the European Commission published its

European Green Deal communication, laying out the more

than 50 legislative and non-legislative initiatives, with many

of key importance for Vattenfall business, that will come out

in the coming 2 years. The implementation of the Green

Deal offers a unique opportunity for Vattenfall to contribute

to shaping the future of the EU and thereby our market

environment. Moreover, if the ambition is strong enough

and various initiatives are designed in the right direction,

it can be an accelerator for Vattenfall in reaching its own

goals. Vattenfall selected 17 files that are crucial to our

business and will work on positioning and outreach on all

17, together with the business.

Strategy

Vattenfall has formulated a strategy with the purpose

to Power Climate Smarter Living and enable fossil-free

living within one generation. This commitment to our

customers, stakeholders and employees provides clear

direction, engagement and focus as well as significant

business opportunities. This strategy is fully implemented

into Vattenfall NV’s operations. The Vattenfall strategy is

summarised below to the extent to which it is relevant for

Vattenfall NV’s activities. For further context and details, we

refer to Vattenfall’s annual and sustainability report.

Fossil-free living within one generation remains our compassFossil-free living within one generation continues to be

a powerful and relevant message that provides a clear

direction for Vattenfall. This bold statement also sets us apart

as leaders in the energy transition, and it is increasingly clear

that customers as well as potential employees and investors

are responding to this. With the successful rebranding of

Nuon to Vattenfall and the introduction of our purpose Power

Climate Smarter Living and our goal of enabling fossil-free

living within one generation to the general public, we see

among the general public a gradual increase in the value of

our brand.

While the goal is clear, the path to get there is still being

uncovered, and we know it will not be an easy road. It starts

with the phase-out of coal, but regulatory uncertainty

remains on how this will occur leading up to the prescribed

end dates, as well as which technologies are viable

replacements. Similarly, we know natural gas will be phased

out next, though there is even greater uncertainty around the

timing and replacement technologies. Meanwhile, growth of



renewables and the proliferation of new and decentralised

energy solutions are accompanied by investment challenges

and risk exposures which require new business models and

competences to properly manage. As we adapt our plan to

the evolving landscape, transparency with our stakeholders

will ensure that we remain a trusted partner and a leader in

the transition.

In 2015 the Board of Directors decided on Vattenfall’s four

strategic objectives which have since guided our strategic

direction. Though our strategy remains directionally the

same, we have updated our strategy wheel to better show

how we are creating traction given the context we operate

in, and how we are capturing business opportunities to

support our purpose to Power Climate Smarter Living and

our goal of enabling fossil-free living within one generation.

We have introduced a new focus area to reflect the

importance of a connected and optimised energy system

to achieving this goal.

• Driving decarbonisation with our customers &

partners with focus on increasing customer centricity

and promoting electrification and climate smart

energy solutions in areas where we have a competitive

advantage. (Formerly: Leading towards sustainable

consumption)

• Connecting and optimising the energy system

with focus on maximising the value of flexibility and

promoting a stable and cost-efficient grid infrastructure

(New)

• Securing a fossil-free energy supply with focus on

growing in renewables, maximising the value of our

existing fossil free assets, and implementing our CO2

roadmap. (Formerly: Leading towards sustainable

production)

• Delivering high-performing operations with focus on

being both competitive and cost-effective, leveraging

opportunities in digitalisation and taking social and

environmental responsibility throughout the value chain.

(Formerly: High-performing operations)

• Empowering our people with focus on securing

necessary competence while improving the employee

journey and providing a safe working environment.

(Formerly: Empowered and engaged people)

Achieving our strategic objectives will require that we

accelerate our work in a number of important areas.

Maintaining a competitive edge and financial strength

are key prerequisites in this work. We will need to meet

customers’ needs faster, increase our efficiency ambitions,

and raise the bar with respect to sustainability.

In 2019 we introduced Vattenfall, Incharge eMobility and

our purpose to the general public in the Netherlands. We

acquired DELTA Energie with its green profile and a strong


Fossil-free living within one generation – a powerful message and clear directionVattenfall has been electrifying industries, powering homes and transforming lives through innovation and collaboration for over a hundred years, and we are now focused on the challenge of transitioning to fully fossil-free energy supply.

Vattenfall engages with customers, business leaders, govern-ments and non-governmental organisations to define and visualise the road ahead – through R&D partnerships, policy discussions and innovative business endeavors. This brings a holistic under-standing of customer needs, energy markets, the value chain and our social impact. Together with our partners we are taking respon-sibility for finding new, sustainable and innovative ways to power the lives of our customers and electrify the transportation sector, heating and cooling, core industrial manufacturing processes and other areas beyond our industry, to ultimately reduce or eliminate the use of fossil fuels in society.

We believe that electrification is a key enabler for reducing CO2 emissions from heating and cooling, transportation, and the manufacturing industry, in turn leading to increased electricity demand. In combination with the phase-out of fossil-based elec-tricity generation in our markets, this points to a strong, long-term market for fossil-free electricity generation. Therefore, a growing, sustainable and cost effective generation portfolio is strategi-cally attractive. The build-out of our renewables portfolio and the CO2 roadmap for phasing out coal in our heat operations are key components of the strategy. In addition, hydro and nuclear power generation play a key role in supporting the energy transition, stabilising the grid and supplying electricity based on fossil-free power generation. Electricity grids support the electrification of new sectors while ensuring reliable supply to our customers.

New business opportunitiesWe also see significant new business opportunities in decentral-ised, integrated and customised energy and network solutions. This is our response to customers wanting sustainable, affordable and convenient energy solutions, combined with significantly lower costs for solar panels and batteries and a growing need for reliable power.

New businesses mean new ways of interacting with custom-ers, technology and society. Additional skills and competences are therefore required. In a highly dynamic environment we foster an inclusive company culture that encourages individual and organisational learning and that is open to diverse viewpoints and

promotes active collaboration. We are also focusing on recruiting and retaining critical talent in a number of areas.

Cost and capital efficiency are prerequisites for success in an increasingly competitive environment. To increase efficiency Vattenfall is conducting a programme to cut costs of SEK 2 billion in staff and support functions by 2020. This is being implemented according to plan, and at year-end we had reduced the workforce by 400 full-time positions. Our existing businesses serve as our financial anchor for the period ahead while we invest in new opportunities.

Vattenfall’s strategy drives our contribution to the UN’s Global Sustainable Development Goals

Our strategy and our purpose reflect the UN’s Agenda 2030, in particular the Sustainable Development Goals for Affordable and clean energy (#7), Industry, innovation and infrastructure (#9), Sustainable cities and communities (#11), Responsible consumption and production (#12), Climate action (#13), and Partnerships for the goals (#17).

VATTENFALL ANNUAL AND SUSTAINABILITY REPORT 2018 19Strategic direction

Vattenfall’s strategy drives our contribution to the UN Sustainable Development Goals

Connectingand optimising

the energysystem

Drivingdecarboniza-tion with ourcustomers &

partners

Securinga fossil-free

energysupply

Deliveringhigh-performing

operations

Empoweringour people

Power ClimateSmarter Living


loyal customer base. By winning the tender of Hollandse

Kust Zuid 3 &4, the start of the first physical preparatory

work for Hollandse Kust 1&2, the construction of Windpark

Wieringermeer, development of several solar parks and last

but not least by closing the Hemweg 8 coal-fired plant we

made important steps in realising our strategy to power

climate smarter living.

Operational Performance

A sustainable Investment planVattenfall continues to invest heavily in growth with a clear

focus on additional renewable production accompanied

by measures to decarbonise the heat business and

strengthen supply networks for electricity and heat. Total

planned investments in 2020 and 2021 are SEK 58 billion

(EUR 5.5 billion), with growth investments accounting

for nearly 62% (EUR 3.4 billion). The investment strategy

reflects Vattenfall’s goal to enable fossil-free living within

one generation.

Around SEK 13 billion (EUR 1.3 billion) of the growth

investments are planned for investments in the

Netherlands. The plan includes expenditures for major

offshore projects that are planned to be completed further

ahead in time, like Hollandse Kust Zuid 1-4 (1,500 MW).

Main onshore projects are Wieringermeer (180 MW),

Wieringermeer Extension (118 MW) and Windplan Blauw

(58 MW). Vattenfall is also investing in solar and battery

projects, including a major - renewable energy park in

Haringvliet, combining onshore wind (22 MW), large-scale

solar (38 MW) and battery storage (12 MW). For large-scale

solar projects, a develop-to-sell business model is applied,

which means that most of the projects are divested after

construction.

In addition, investments will be made in new energy

solutions, heat supply, decentralised heat solutions and

e-mobility. For the heat operations this includes major

projects like the Amsterdam South Connection, enabling

considerable growth in district heating, and Green Heat

Diemen, a new wood pellet-fired heat only boiler with a

capacity of 120 MWth located southeast of Amsterdam.

Besides these growth activities, Vattenfall is planning

significant investments in maintenance and replacement

of the existing assets.

Customers and SolutionsVattenfall’s Customers & Solutions business supplies

electricity, gas and energy solutions to retail and business

customers, with 10.2 million customer contracts in Europe.

We are one of the market leaders in the retail and business

segments in the Netherlands (3.6 million electricity and

gas contracts). We offer a broad range of decentralised

solutions in most of our markets and are one of the largest

energy solution providers in the Netherlands through our

subsidiary Feenstra, with 860,000 customer contracts.

Our ambition is to be a leading customer-centric company,

supplying a wide range of sustainable energy solutions

and services to retail and business customers. We help

our customers to live a climate-smart life and contribute to

their safety and comfort. We offer sustainable and efficient

products and services based on customers’ individual

energy needs. Our focus is on areas like smart, data-

based solutions, decentralised generation (in particular

solar (PV) and heat pumps) and new customer interaction

models with the aim to achieve significant market size.

We are striving to optimise the customer experience by

accelerating digitalisation and offering bundled, integrated

and climate-smarter solutions. We are increasing the

profitability of our commodity sales business by retaining

and growing our customer base while reducing the cost to

serve.

Our retail customer base grew by 0.2 million contracts

during the year in the Netherlands, including the customers

from the Dutch regional supplier DELTA Energie which we

acquired in March 2019. DELTA Energie supplies renewable

electricity and gas to private customers and small and

medium-sized companies, primarily in the Zeeland province

of the Netherlands. DELTA Energie has approximately 120

employees and 170,000 customers.

We improved our absolute Net Promoter Score (NPS) during

the year and stayed ahead of our average peer competitors

as evidenced by our relative NPS of +1. We changed our

brand name in the Netherlands from Nuon to Vattenfall with

good response and reasonably limited impact on churn

and commercial results given the magnitude of this change.

Powerpeers, our previously separately branded peer-to-peer

platform for sharing renewable energy in the Netherlands, is

being integrated into Vattenfall to offer this service to all of

our Dutch retail customers.

At Vattenfall NV, we also take our responsibility when

it comes to the affordability of energy. We do this in

our own billing process and by working together with

municipalities on early signalling and other creditors

within the creditors' coalition. We offer customers various

options, such as choosing your own payment date and

payment arrangements, to prevent increasing debts. The

initiative ‘Nuon Verlicht’ helps customers under judicial

administration and we offer these customers a free energy

scan to reduce their energy consumption and thus lowering

their energy bill.

We increased our sales of e-mobility solutions in the

Netherlands. We now operate more than 9,000 charging



points, making the transition to sustainable, electrified

transport easier. In the Netherlands, Vattenfall owns and

operates almost 20% of the public charging stations but

offers its customers access to around 95% of all charging

stations in the country through roaming agreements.

In addition, together with our partners we are building

InCharge to be one of the biggest charging networks in

Northern Europe.

We have won the tender for public charging of electric cars

in Amsterdam. Here we are operating more than 3,500

stations of which around 900 are included in our so-

called Flexpower project. The Flexpower project is a smart

charging solution, which is launched in 2019, that steers

the charging stations based on daily load curves from the

grid operator and forecasts for local neighbourhood solar

panel production. On the consumer side, a pilot project is

ongoing in Amsterdam, where we have installed private

home chargers that are controlled by Vattenfall’s trading

business so that the customer’s EV is charged when prices

are the lowest.

We have acquired a Dutch energy services company

called Senfal. The acquisition will add new services for our

large industrial customers with the aim of unlocking value

through flexibility and optimisation of renewable generation.

Through its services, Senfal is able to substantially reduce

the energy bill for large industrial companies and realise

substantial improvements in power trading profits for wind

and solar farms as well as battery owners.

WindVattenfall continues to be a leading player in the offshore

wind power industry as well as one of the leading companies

in onshore wind power in Europe, especially in Denmark and

the Netherlands. We operate a portfolio of about 200 wind

turbines with a total installed capacity of approximately 0.4

GW in the Netherlands. In 2019 we continued our focus on

solar power (PV) technology and battery storage. We now

operate 20 MW of solar power comprising a combination of

decentralised and large-scale projects and have installed 3

MW of battery capacity in the Netherlands. Total renewable

production, including direct purchasing from third parties,

increased by 12% from 1.2 TWh to 1.3 TWh.

We want to be a leader in the renewables transition through

construction and operation of onshore and offshore wind

power and to achieve a leading position in solar power in

the near future, by further strengthen the project pipeline,

to be a leader in Levelised Energy Cost (LEC), to innovate

within operations and maintenance and keep focus on the

digitalisation of our entire value chain, to use the potential of

combining solar, wind and battery technology for renewable

hybrid power plants and to a greater extent decouple the

delivery of electricity from the time of production.

In addition to the already won tender for the Hollandse

Kust Zuid 1 & 2 offshore wind farm, Vattenfall also won the

second phase of the Dutch offshore wind farm Hollandse

Kust Zuid 3 & 4. Together, the wind farms will have a

capacity of approximately 1.5 GW, which corresponds to

the annual electricity consumption of up to 3 million Dutch

households, and will become the two first non-subsidised

offshore wind farms in the world, when commissioned.

This is proof that our continuous efforts to reduce costs

along our entire value chain are working successfully.

The wind farms will contribute significantly to Vattenfall’s

goal of enabling fossil-free living within one generation.

In early 2019, the original 17 turbines of the Dutch

Slufterdam onshore wind farm were replaced by 14 more

efficient ones. As a result, the power output doubled from

25 MW to 50 MW, of which 29 MW belongs to Vattenfall.

About 60 km north of Amsterdam, Vattenfall is repowering

and expanding the Wieringermeer onshore wind farm up

to a total combined capacity of 298 MW.

Next to our wind activities, a number of solar power and

battery projects were developed during the year. Vattenfall

has finalised the installation of solar panels at existing

power plants in Velsen, Eemshaven and Hemweg in the

Netherlands with a total capacity of 10 MW. Additionally,

Vattenfall is building a new hybrid energy park, consisting

of solar panels, wind turbines, and batteries at Haringvliet

in the Netherlands. By 2020, Haringvliet South will consist

of a total of 124,000 solar panels (38 MW), six wind

turbines (22 MW) and 12 shipping containers of batteries

manufactured by BMW (12 MWh).

With Vattenfall’s ambition to enable fossil-free living within

one generation, the hybrid renewable energy park can play

a huge part in that ambition as wind, solar and batteries

have many synergies if we develop them together, sharing

infrastructure and having a stable and reliable production

throughout the year.

In addition, we have significantly grown our renewable PPA

business. Vattenfall signed a 15-year purchase agreement

for renewable electricity from a Zeewolde onshore wind

farm in the Netherlands. Vattenfall will purchase power from

83 of the turbines, in total approximately 300 MW, making

this Vattenfall’s largest PPA to date in the Netherlands.

HeatThe Heat operating segment comprises Vattenfall’s

heating and condensing businesses and Vattenfall is

present in four of the top ten largest markets in Europe.

Our core business is district heating, where we have 1.8

million customers in large metropolitan areas like Berlin,

Amsterdam and Uppsala, serving the residential and

commercial property markets (B2B business). In addition,

we have a decentralised heat/energy business with 75,000



customers with significant growth potential in Sweden,

Germany, the Netherlands and the UK. Vattenfall’s Heat

business focuses on solid cash flows, health and safety

for all operations including service companies and high

reliability of generation and supply.

Our strategy is to be a leader in decarbonisation and the

management of heat solutions and customer-centric

energy solutions. We are decarbonising our production

portfolio in the cities where we are active, with the aim

to replace all natural gas by 2050, at the latest. This will

require active system management and the Heat business

will position itself as a system manager that integrates a

mix of own and external heat sources while minimising

individual customers’ energy consumption with the help of

state-of-the-art digital tools. We focus on profitable growth

of our district heating operations. Going forward, we will

become even more customer-centric and develop our

product/service offering beyond district heating. We will

offer fossil-free, simple and smart comfort with focus on

energy efficiency and integrated energy solutions (heating,

cooling, e-mobility, local electricity generation and digital

solutions that minimise energy consumption).

The total produced electricity amounts to 19.0 TWh in 2019

(15.9) by our gas and coal-fired plant in the Netherlands.

The increase in production was mainly related to improved

spreads on our gas-fired plants and higher availability. The

number of heating customers increased further from 120

thousand in 2018 to 123 thousand in 2019. Total sold heat

amounted to 6.2 PJ in 2019 (6.2) and total realised CO2

reduction over 2019 was around 254,000 ton CO2.

In Amsterdam, the development of the biomass at our

Diemen gas-fired CHP plant is ongoing. The permit

application has been submitted, the engineering has been

executed and invitation for tenders have been sent out. In

addition, the activities to connect the two different district

heating networks in Amsterdam has been started. This

connection should enable the further growth of the district

heating network in Amsterdam, reducing CO2 by 75,000

ton. There are also projects planned to integrate geothermal

heat and excess heat from data centres in the district

heating network in Amsterdam. The development of the

Almere Pipeline project in the Netherlands to integrate third

party biomass is in progress.

The coal-fired power plant Hemweg 8 in the Netherlands

closed at the end of 2019. The plant site is under

development to a facility where fossil-free electricity and

heat can be produced for Vattenfall’s customers.

Our peopleVattenfall offers a wide array of job opportunities with

continuous learning possibilities. All employees in our

company are given the opportunity to support the energy

transition to fossil-free living within one generation. We

want every individual to bring their unique talents and

competences and be their authentic selves at work. In this

way we form a diverse environment, with the right conditions

for employees to make a difference in enabling climate-smart

living.

We strive to enable our people to unlock their unique

potential here at Vattenfall, stay engaged and high-

performing in a work environment with a special mix

of professionalism and informality that is healthy, safe,

supporting and inclusive. Our ambition for a fossil-free future

is a foundation for meaningful work and opportunities for

individual growth and learning across the entire energy

value chain in a variety of roles, businesses and regions.

We are working actively to provide a safe and healthy work

environment, to enable an engaging, high-performance

culture and to secure the right and diverse competences.

Our goal is to have zero accidents and zero work-related

sickness. The focus of our health and safety (H&S) strategy

is to enable employees to perform in an inspiring and caring

culture, free from any harm to mind or body. Our policy clearly

states that work shall stop if employees or contractors are in

danger. In 2019, Vattenfall has implemented the Hearts and

Minds approach, an international best practice, to address

the root cause of accidents. Despite all efforts, the Lost

Time Injury Frequency (LTIF) increased to 2.1 in 2019 from

1.9 in 2018 for Vattenfall. There is no single cause for the

increase in accidents, though the most common root cause

is culture and awareness. To counter this, we will continue to

work relentlessly to improve the H&S culture, H&S maturity

level, and have a high focus from the entire organisation,

including top management. We trust that these measures

will be reflected in a reduction of the LTIF in 2020. The LTIF

decreased from 2.4 in 2018 to 2.0 in 2019 in the Netherlands.

Given that organisational and social health aspects are

playing an increasingly important role in the well-being of

employees, a variety of initiatives such as workshops and

podcasts relating to stress, work-life balance and workload

have been initiated. In addition, specific activities are

organised on a local level, such as briefings, workshops

and surveys related to health and harassment. The positive

impact from our efforts is reflected in the sick leave rate,

which has decreased from 4.0% in 2018 to 3.7% in 2019 for

Vattenfall. The sick leave rate for the Netherlands is stable at

4.4% (excl. Feenstra).

In 2017, we set out on a journey to transform our culture

towards being more open, active and positive in a work

environment committed to safety. Since then, we have

stepwise launched our activation programme aiming to

strengthen employee engagement by driving change in the

company culture. The programme helps all our people to



understand our purpose and our goal, how to get there and

why we need to change, just as it puts everyone’s personal

contribution into this context. In 2019, we re-defined the

leadership behaviour necessary to deliver on our purpose

and drive the desired company culture. We expect our

managers to Accelerate Learning, Connect People, and

Drive Innovation.

The number of employees decreased to 19,814 full-time

equivalents (FTEs) from 19,910 FTEs in 2018 for Vattenfall. In

the Netherlands, the number of employees increased from

3,418 FTEs in 2018 to 3,558 FTEs in 2019, of which 895 are

female and 2,663 male. As the speed of progress on the

climate issues needs to increase during the years to come,

so does our speed in learning and the ability to adapt to

new ways of working. This is why we have given even more

attention to securing the availability of competences in the

long term.

In 2019, we focused on further launching our Employer

Brand to attract sought-after competences within

technology and maintenance, using different methods

and channels to find and attract people with the right

skills and attitude. We also launched our new career

website. Vattenfall also runs and participates in various

programmes and initiatives that support broad aspects

of diversity and inclusion. We believe this strengthens us

as an employer and enables us to better understand our

customers’ expectations and makes us a better partner in

the communities we serve.

IntegrityOperating our business with integrity is essential for

ensuring that we live up to our stakeholders’ expectations.

They depend on us to conduct our business in a fair and

responsible manner. We have a zero tolerance policy

for bribery and corruption, and we are a member of the

Partnering Against Corruption Initiative (PACI), a cross-

industry collaboration launched by the World Economic

Forum, as well as of Transparency International Sweden.

We require that all employees take personal responsibility

to act in accordance with the company’s ethical guidelines,

which are laid out in the Vattenfall Code of Conduct and

Integrity. Tailor-made face-to-face training programmes and

e-learning tools support these ambitions. We expect our

suppliers and business partners to act ethically and in full

compliance with the applicable rules in every country they

do business, as outlined in the Vattenfall Code of Conduct

for Suppliers. Read more about Vattenfall’s integrity

organisation in the Corporate Governance Report in the

annual report of Vattenfall AB.

The Vattenfall Code of Conduct and Integrity applies

worldwide to all employees as well as temporary staff

(such as consultants and contractors) acting on behalf

of Vattenfall. It describes the behaviour we expect of all

representatives of Vattenfall. All managers in the Executive

Group Management of Vattenfall AB and three levels below,

as well as all employees who have extensive contact with

competitors, are required to participate in the Vattenfall

Integrity Programme (VIP). It is the responsibility of every

manager to lead by example and to ensure their team

members understand our way of working. All suspected

incidents are to be reported to the employee’s immediate

manager, to the integrity organisation or to the Internal

Audit department. Additionally, we have a Group-wide

whistleblowing function with locally appointed external

ombudsmen (attorneys) to whom employees, consultants

and suppliers can anonymously report suspected

improprieties. If, despite all efforts to prevent non-compliance,

non-compliance is determined, mitigating actions are defined

and followed-up on. All incident investigations are led by

Vattenfall’s Internal Audit unit. We have conducted and will

continue to conduct risk assessments related to integrity.

Our integrity work is not just an internal issue – we also

have corresponding requirements for our suppliers. We

require our suppliers to comply with the Vattenfall Code of

Conduct for Suppliers, or an equivalent standard agreed

together with us. In the integrity area, the Code of Conduct for

Suppliers puts special emphasis on business integrity, anti-

corruption, conflicts of interest and competition law, as well

as information on how to use the whistleblowing function. It

is based on, among other things, the UN Global Compact,

the UN Guiding Principles for Business and Human Rights,

ILO declarations and the OECD Guidelines for Multinational

Enterprises.

Fuel Mix supplyAll electricity suppliers in the EU are required by law to publish

the fuel mix of the electricity they supply to customers. Our

supply mix is shown in the figures below, which illustrates that

share of renewable electricity increased by 6.1% from 37.3%

in 2018 to 43.4% in 2019. The share of renewable electricity

represents the number of Guarantees of Origin (GoO) used

for green electricity supplied to end-customers. The supply

mix also shows that a large part of the energy supply in the

Netherlands is sourced from natural gas.



Production fuel mixCO2 emissions decreased from 494 to 469 grams per kWh.

The total production of renewables increased by 0.5 TJ. The

relative share of renewable energy however decreased from

6.9% in 2018 to 6.5% in 2019, due to very good spreads

and availability of our gas plants. The share of coal-fired

power plants is lower compared to 2018, mainly due to

lower spreads on our coal plant in 2019.



Net sales Net sales increased by 8.1% to EUR 2,832 million in 2019.

The average electricity and gas prices were higher in 2019

compared to 2018, affecting both the Net sales and the

related Cost of purchases. In addition Net sales increased,

due to the acquisition of DELTA Energie.

Gross margin In 2019, the gross margin decreased by 51% to EUR 561

million, which is mainly due to EUR 458 million (2018: gain

EUR 58 million) unrealised fair values losses on own-use

power and gas forward contracts. The fair value loss is the

result of decreasing forward prices, mainly caused by the

mild winter of 2018/2019, falling gas production cost and

increased electricity generation by renewables. Vattenfall

NV does not apply hedge accounting and therefore these

fair value losses are reflected in profit and loss.

Other external expenses Operating expenses decreased by 13.0% to EUR 376

million in 2019. This decrease is mainly due to accounting

effects. In 2019, the implementation of IFRS 16 resulted in

a reclassification of lease expenses from Other external

expenses to Depreciation. In addition, the direct costs

related to our construction activities for third parties is

reclassified from Other external expenses in 2018 to Cost

of purchases in 2019. Reference is made to Note 3 for more

detailed information on the implementation of IFRS 16.

Personnel expenses The total number of FTE increased from 3,418 FTE at the

end of 2018 to 3,558 FTE at the end of 2019, mainly due to

the acquisition of DELTA Energie and growth in wind.

Other operating income and expenses, netThe other income of EUR 81 million in 2019, mainly consists

of the compensation for the early closure of Hemweg 8,

compensation from insurances and dunning fee. The other

income of EUR 45 million in 2018, mainly included the result

on the transfer of the UK Wind entities to Vattenfall AB and

dunning fee.

EBITDA/EBITEBITDA (earnings before interest, taxes, depreciation and

amortisation) decreased from EUR 482 million positive in

2018 to EUR 28 million negative in 2019, primarily due to

the unrealised negative price development on our power

and gas purchase contracts.

Depreciation, amortisation and impairments increased from

EUR 181 million to EUR 272 million in 2019, due to higher

impairments and implementation of IFRS 16. In 2019 the

impairments amounted to EUR 68 million, mainly relating to

early closure of Hemweg 8, while the impairments in 2018

amounted to EUR 12.

EBIT decreased from EUR 301 million positive in 2018 to

EUR 300 million negative in 2019, primarily due to the

unrealised negative price development on our power

and gas purchase contracts and higher impairments. In

2019, we realised a positive EBIT of EUR 128 million, when

excluding the unrealised fair value losses on own-use power

and gas purchase contracts (EUR 438 million).

Financial Performance


Income statementThe table below shows the results for 2019 compared to 2018.

Amounts in EUR million, 1 January-31 December 2019 2018

Net sales 2,832 2,619

Cost of purchases -2,271 -1,468

Gross margin 561 1,151

Other external expenses -376 -432

Personnel expenses -296 -281

Other operating incomes and expenses, net 81 45

Participations in the results of associated companies 2 -1

Operating profit before depreciation, amortisation and impairment losses (EBITDA) -28 482

Depreciation, amortisation and impairments -272 -181

Operating profit (EBIT) -300 301


Non-current assets

Non-current assets increased by 12% to EUR 2,632 million

at the end of 2019. This increase is mainly due to the

acquisition of DELTA Energie in 2019 and the investments in

the Wieringermeer and Hollandse Kust Zuid Windfarms. In

addition the non-current assets increased as a result of the

recognition of right-of-use assets due to implementation of

IFRS 16.

Current assetsCurrent assets decreased by 41% to EUR 1,738 million at

the end of 2019. The decrease was caused mainly by lower

trade receivables from related parties as a result of dividend

payment and capital reduction.

Cash and cash equivalentsCash and cash equivalents increased by EUR 38 to EUR

83 million at the end of 2019. A positive cashflow from

operations (EUR 487 million), mainly due to positive EBIT

when excluding the unrealised fair value losses, was used

for investment in Property, plant and equipment (EUR 324

million), acquisition of DELTA Energie and Senfal (EUR 66

million).

Non-current liabilitiesNon-current liabilities increased by 35% to EUR 393 million

at the end of 2019. The increase was caused mainly by

the recognition of lease liabilities due to implementation of

IFRS 16.

Current liabilitiesCurrent liabilities decreased slightly by 1% to EUR 2,028

million.

The net cash position at the end of 2019 amounted to 305

million, compared to a net cash position of EUR 890 million

at the end of 2018. The decrease in the net cash position

is mainly due to a dividend payment and share premium

repayment to Vattenfall AB of EUR 750 million.


Balance sheet

Condensed balance sheetAmounts in EUR million 31 December 2019 31 December 2018

Non-current assets 2,632 2,346

Current assets 1,738 2,941

Cash and cash equivalents 83 45

Total assets 4,453 5,332

Equity 2,032 2,996

Non-current liabilities 393 292

Current liabilities 2,028 2,044

Total equity and liabilities 4,453 5,332

Net cash position

Reconciliation net cash positionAmounts in EUR million 31 December 2019 31 December 2018

Cash and cash equivalents 83 45

In-house Vattenfall group cash pool 333 874

Total free cash 416 919

Non-current interest-bearing liabilities 80 27

Current interest-bearing liabilities 31 2

Gross debt position 111 29

Net cash/(debt) position 305 890


The Vattenfall Risk Management FrameworkThe objective of the Vattenfall Risk Management

Framework is to provide reasonable assurance that the

achievement of strategic and operational objectives is

effectively monitored, that the financial reporting is reliable

and that current laws and regulations are complied with.

The framework is part of Vattenfall NV’s Governance and

designed to ensure an acceptable risk exposure, based

on a thorough and transparent analysis of Vattenfall NV’s

risks, thus facilitating the in-control situation and risk

exposure based on an appropriate assessment of the risk-

reward balance. The framework facilitates the monitoring

of risks with a potential impact on the organisation and is

based on a set of best practice policies, procedures and

internal control mechanisms. Vattenfall NV has a limited

risk appetite and all risks as reported and discussed are

continuously reconciled with this risk appetite.

The Vattenfall Risk Management Framework focuses

on ensuring that the most important risks are identified

and that appropriate control measures are executed to

manage these risks. The Framework is based on the COSO

Enterprise Risk Management (ERM) Framework.

The ERM is executed as a continuous process for

identifying, assessing, managing and following up on risks

at all levels of the business at an early stage. An update of

the risk situation is presented periodically for discussion at

Management and Supervisory Board level.

Important components of the Vattenfall Risk Management

Framework are:

• The Vattenfall Management System (VMS) which

Vattenfall NV, as part of Vattenfall, implemented and

which contains regulations, guidelines and procedures

that are relevant for all Vattenfall employees and for the

relationship between Vattenfall AB and its subsidiaries,

Business Units, Staff Functions and other Vattenfall

companies. VMS includes the Vattenfall Code of

Conduct and the Whistle-blower Policy, which are

publicly accessible at www.vattenfall.com. VMS also

comprises of the IFRS accounting manual and the

reporting manual;

• The Vattenfall Code of Conduct, which sets the

behavioural rules for all employees. The Code of

Conduct fosters an honourable business culture in

which the rules applicable to employees are clear.

Breaches of the Code of Conduct are not tolerated. If

they come to the attention of Vattenfall, they will be

investigated and may lead to sanctioning;

Business risks and Risk management

Risk management Vattenfall NV is exposed to a number of risks that could

have an adverse impact on operations and outcome.

A better understanding of and control over these risks

can potentially generate better results from the business

activities. The Vattenfall NV Management Board is

responsible for the company's risk management and

control system. Vattenfall NV strives for transparency with

regard to risk exposure and recognises all risks that may

impact the company.

Vattenfall NV, as part of Vattenfall, applies the ‘three lines

of defence’ model for the management and control of

risks. The first line of defence consists of the business

units, which own and manage risks. The risk organisation

makes up the second line of defence and is responsible for

monitoring and controlling risks. The internal audit function

is the third line of defence.

The following paragraphs describe the performed risk

management efforts.


Business units

Three lines of defence

First line of defence:Ownership and

management or risk

Risk organisation andother control functions

Second line of defence:Risk management

and risk control

Internal audit

Third line of defence:Independent review

and oversight

Risks


• The Risk Management organisation, headed by the

Chief Risk Officer of Vattenfall, supports Vattenfall

NV in applying Vattenfall’s risk framework. The Risk

Management organisation monitors market risk on a

daily basis, manages credit risk, oversees compliance

with policies and risk limits, and guides the group-wide

reporting of significant business risks. Together with

other specialist risk stakeholders (for example health

and safety, information security), the Risk Management

organisation supports the Business Units in the

identification, quantification, mitigation, monitoring and

reporting of risk;

• The Integrity function, which advises and reports

on issues with regard to competition, anti-bribery/

corruption, conflict of interest, the whistleblowing

function and inside information. In addition, the function

advises management on measures to enhance

compliance and monitoring compliance risks, and it

stimulates awareness of the Code of Conduct. The

Vattenfall NV Integrity, Fraud and Incidents report

is submitted semi-annually to the Vattenfall NV

Management Board. This report focuses on integrity

developments, fraud and other incidents reported in the

Netherlands and is a combined report of Internal Audit

and the Integrity department;

• The Legal department, which submits the Claims &

Litigation report to the Management Board of Vattenfall

NV. The report contains a summary of current and

potential legal proceedings and disputes;

• The Vattenfall Internal Financial Control Framework (IFC),

which reports on the effectiveness of the controls which

aims to assure reliable financial reporting and which is

partly based on the results of the key controls for the

primary processes within the different business areas;

• The planning & control cycle, in which annual budgets

are assigned for each organisational unit and the

outcome of which is subsequently discussed between

the Management Board and the Business Units;

• The periodic reporting on Business Units’ financial and

operational performance, partly based on the system of

Key Performance Indicators (KPIs);

• The risk reports, highlighting the risks identified as

having a potentially significant impact on the business.

These reports are challenged by Risk Management

and further reviewed in semi-annually sessions

with members of the Management Board. These

Business Unit risk reports are used as the basis for

Risk Managements’ formulation of the semi-annually

Enterprise Risk Report, which summarises the most

significant risks facing the organisation. This report is

discussed with the Supervisory Board;

• The responsible management’s confirmation at

corporate and unit level of the reliability of the financial

reporting through signed Letters of Representation;

• The execution of audits by the Internal Audit

department in conformity with the annual plan, which

is approved by the Management Board. The outcome

of their audits are discussed with management and

summarised for the Supervisory Board;

• The follow-up of findings from internal and external

audits by the Business Units, which are periodically

reported on to the Management Board.

All risks are where possible quantified both with regard to

(gross) exposure as well as with regard to probability. The

Management Board periodically discusses all aspects

of the framework, including all reported individual and

aggregated quantified risks. This includes conclusions with

regard to either the acceptance of the ultimate risks, or the

instigation of actions to reduce risks, as well as with regard

to the reconciliation with the risk appetite.

Main risks and mitigationThis section describes the most important risks within

Vattenfall NV.

• Market Price Risk Assets. The revenues (Gross Margin)

from Vattenfall NV’s generation assets are highly

dependent on the pricing developments on the energy

markets.

Mitigation(s): Risk is actively managed and monitored

via the Hedge Strategy Process on Vattenfall level.

• Decrease of sales volume. Developments in energy

efficiency and decentralised generation could lead to

lower consumption and demand for electricity and gas

resulting in lower margins on commodities. Quantified

risk is medium.

Mitigation(s): Decrease operational costs and

development of volume independent solutions (e.g.

solar lease, energy roof, storage).

• CO2 low energy generation. Introduction of a CO2 floor

price and replacement of gas used for heating by

district heating systems based on renewable sources

might affect presently invested capital and required

replacement investments.

Mitigation(s): Continuous monitoring of and acting on

technical and regulatory developments.

• Increased competition. Missing profit due to increased

competition both on current customer base and

innovation. Quantified risk is medium.

Mitigation(s): Continuously monitor the market for

competitive products & new developments; prioritise

development areas (short term versus long term);

develop non-traditional business models and actively

work together with start-ups and other market entrants;

attract right capability and create multi-disciplinary

teams and foster customer co-creation.

• Temperature dependence of gross margin. Temperature

is an important driver for gas and heat volumes. In warm



winters the volume offtake will be lower with a negative

impact on gross margin. Quantified risk is low.

Mitigation(s): Temperature as well as impact on volume

offtake is monitored. Explore product innovation to

make sales less temperature dependent.

Note 28 to the financial statements provides further

qualitative and quantitative information on financial risk

management.

ResponsibilityVattenfall NV’s Management Board is responsible to

ensure that the design and operation of Vattenfall’s internal

risk management and control system is effective. During

the year, the design and operation of this system was

monitored and evaluated, amongst other based on the

business control information, the Internal Audit reports and

the management letter from the external auditor.

The Vattenfall NV Enterprise Risk Management

Framework does not provide absolute assurance as to

the achievement of the corporate objectives, nor does it

guarantee that material errors, losses, fraud or violations

of laws and regulations will not occur in the operational

processes and/or the financial reporting.

With due regard to the above, the Management Board

is of the opinion that the internal risk management and

control systems provide a reasonable assurance that the

financial reporting does not contain any errors of material

importance and that the risk management and control

systems worked properly with regard to the financial

reporting risks in the year under review.

The above was also discussed with the Supervisory Board

in the presence of the internal and external auditors.

Outlook and ChallengesOur portfolio of energy solutions will be scaled by

establishing sales channels that support our growth targets

coupled with automated low-cost operations. This will be

especially relevant for the Dutch market, where a national

climate agreement was passed in the Parliament in 2019,

which among other things aims at gradually phasing out

natural gas. We are developing a portfolio of fossil-free

decentralised heating solutions to achieve a relevant

market share in the transition to a fossil-free heating system

in the Netherlands. In addition we are developing our

district heating network, connecting new customers and

increase the sourcing of green heat from industrial facilities

owned by third parties as well as heat from biomass.

We continue to grow our customer base organically while

also working on retention initiatives, just as we will act upon

acquisition opportunities when they arise. In 2020, we will

make further steps in integrating Delta Energie BV in our

processes and systems. We plan to extend our e-mobility

services to all our current customer markets, capturing

significant benefits of scale and enhancing value for our

customers and key partners, such as leasing companies

and car makers. We will continue to work towards

exceeding our customers’ sustainability expectations with

our products and services. We take sustainability into

account in our procurement processes and engage with

internal and external partners to share best practices and

learn from each other.

Renewable energy is key in supporting Vattenfall’s purpose

to Power Climate Smarter Living and realise the transition

to fossil-free living. We will continue to invest in wind,

solar, and battery projects in the coming years as well as

optimise our operations to maximise renewable electricity

generation in a sustainable manner. With respect to our

existing wind farms, costs will be lowered by raising the

level of standardisation, digitalisation, and data analysis

for predictive maintenance and optimised marketing of

the electricity generated. Sustainability is the basis for

Vattenfall's strategy and is a prerequisite for long-term

profitability. In the wind, solar and battery business,

sustainability has been identified as one of the key levers

to facilitate our growth ambition. In the coming years we

will heavily invest in the development of the wind farms

Hollandse Kust Zuid 1 to 4 and Wieringermeer, amongst

others. The investments will be financed through positive

cash flows from operations and if necessary by internal

loans from our parent. We have a credit facility in place

with our parent Vattenfall AB of EUR 500 million, which is

currently not utilised.

We are committed to reduce CO2 emissions from our

power plants. One example of these efforts is to run a pilot

project to replace natural gas with hydrogen in our Magnum

plant in Eemshaven. In the coming years we will demolish

the Hemweg 8 coal-fired power plant. Together with

partners the Hemweg location will be developed into a site

where sustainable heat and electricity can be produced for

our customers.

Covid-19The world has drastically changed due to the Covid-19

pandemic, affecting the whole world, with a lock-down in

Europe and more pressure on the industry. We are proud

of all our employees who are working hard every day to

ensure the continuation of stable delivery of electricty,

gas and heat to our customers. They show a fighting spirit

to keep making this possible despite the challenging

times. We have taken measures to reduce the risks of the

virus for our employees. Who can work from home has



to stay home and we support them in various ways. We

are following all instructions from the Government and we

implemented protocols and measures to mitigate the risk

for our employees that can not work from home as they

work in vital processes or at the sites of our clients. Up to

the publication of this report we have not seen any major

disruptions in our operations.

The virus has impact on the whole economy, affecting

both the energy demand from our business consumers

and the energy prices. This will have impact on our

performance in 2020. We are therefore closely monitoring

our financial situation and taking measures to secure our

operations. In light of the current Covid-19 situation and

a careful evaluation of our risk-reward balance against

the remainder of our strong pipeline and the rest of our

ongoing projects, we have decided not to participate in

the tender for Hollandse Kust Noord and to not pay any

dividend to our shareholder during the course of 2020

relating to financial year 2019.

Composition of the Management and Supervisory BoardCurrently there are no female members on the

Management Board, which is due to the small size of the

board. The distribution of board seats between men and

women in the Supervisory Board is in line with the Act on

Management and Supervision.

A final word We have successfully introduced our Vattenfall brand

and purpose to the public in the Netherlands. We see a

positive trend in customer loyalty scores (NPS) coupled

with a stable customer base in a highly competitive

environment. Without the commitment and hard work of

our staff, we could not have achieved all that we have nor

would we be in a position to overcome the challenges we

face. We are extremely proud of all our employees in these

difficult circumstances and express our gratitude to all

our employees for their great work during an eventful and

turbulent year.

Amsterdam, 15 May 2020

The Management Board

Martijn Hagens


Financial statements

Consolidated accounts 19• Consolidated income statement 19

• Consolidated statement of comprehensive income 20

• Consolidated balance sheet 21

• Consolidated statement of cash flows 22

• Consolidated statement of changes in equity 23

Notes to the consolidated accounts 24

Company accounts 51• Company balance sheet 51

• Company income statement 51

Notes to the company accounts 52

Financial statements Vattenfall NV Annual Report 2019 18

Consolidated accounts


Consolidated income statementAmounts in EUR million, 1 January - 31 December Note 2019 2018

Net sales 5 2.832 2.619

Cost of purchases -2.271 -1.468

Other external expenses 7 -376 -432

Personnel expenses 31 -296 -281

Other operating incomes and expenses, net 81 45

Participations in the results of associated companies 15 2 -1

Operating profit before depreciation, amortisation and impairment losses (EBITDA) -28 482

Depreciation, amortisation and impairments 12, 13 -272 -181

Operating profit (EBIT) -300 301

Financial income 8 2 6

Financial expenses 9 -5 -11

Profit before income taxes -303 296

Income tax 10 89 -85

Profit for the year attributable to owner of the Company -214 211


Consolidated statement of comprehensive income

Amounts in EUR million, 1 January - 31 December 2019 2018

Profit for the year -214 211

Other comprehensive income

Items that will be reclassified to profit or loss when specific conditions are met

Cash flow hedges - changes in fair value — 3

Translation differences — 20

Income taxes related to items that will be reclassified — -1

Total Items that will be reclassified to profit or loss when specific conditions are met — 22

Total other comprehensive income, net after income taxes — 22

Total comprehensive income for the year -214 233

Attributable to owner of the Company -214 233


Consolidated balance sheet

Amounts in EUR million Note 31 December 2019 31 December 2018

Assets

Non-current assets

Intangible assets 6, 12 267 170

Property, plant and equipment 6, 13 2,076 1,888

Participations in associated companies and joint ventures 15 28 31

Other shares and participations 2 2

Derivative assets 27 12 98

Deferred tax assets 10 194 116

Contract assets 5 6 —

Other non-current receivables 47 41

Total non-current assets 2,632 2,346

Current assets

Inventories 16 85 130

Trade receivables and other receivables 17 1,245 2,318

Advance payments paid 18 1 8

Derivative assets 27 190 353

Prepaid expenses and accrued income 19 192 107

Current tax assets 10 19 25

Cash and cash equivalents 20 83 45

Assets held for sale 6 —

Total current assets 1,821 2,986


Equity and liabilities

Equity attributable to owner of the Company

Share capital and premium 2,895 3,481

Retained earnings incl. profit for the year -863 -485

Total equity attributable to owner of the Company 29 2,032 2,996

Non-current liabilities

Interest-bearing liabilities 21 80 27

Provisions 23 84 75

Derivative liabilities 27 34 6

Deferred tax liabilities 10 1 1

Contract liabilities 5 194 183

Total non-current liabilities 393 292

Current liabilities

Trade payables and other liabilities 24 1,236 1,626

Contract liabilities 5 26 42

Advance payments received 25 6 4

Derivative liabilities 27 210 39

Accrued expenses and deferred income 26 500 305

Current tax liabilities 10 2 6

Interest-bearing liabilities 21 31 2

Provisions 23 16 20

Liabilities associated with assets held for sale 1 —

Total current liabilities 2,028 2,044


Vattenfall NV Annual Report 2019 22Financial statements

Consolidated statement of cash flows

Amounts in EUR million, 1 January-31 December 2019 2018

Operating activities

Operating profit before depreciation, amortisation and impairment losses -28 482

Tax paid -13 -34

Capital gains/losses, net 13 8

Interest received 2 1

Interest paid -3 -2

Changes in the fair value of derivatives 448 -58

Other, incl. non-cash items -2 -48

Funds from operations (FFO) 417 349

Changes in inventories 45 -45

Changes in operating receivables 255 760

Changes in operating liabilities -239 -687

Other changes 9 -19

Cash flow from changes in operating assets and operating liabilities 70 9

Cash flow from operating activities 487 358

Investing activities

Acquisitions in group companies -66 —

Other investments in non-current assets -346 -228

Total investments -412 -228

Divestments — 193

Loans granted -17 —

Loans repaid 11 —

Cash flow from investing activities -418 -35

Cash flow before financing activities 69 323

Financing activities

Interest-bearing debt raised 1 3

Interest-bearing debt repaid -32 -27

Dividends paid to owners - -286

Cash flow from financing activities -31 -310

Cash flow for the year 38 13

Cash and cash equivalents

Cash and cash equivalents at start of year 45 32

Cash flow for the year 38 13

Cash and cash equivalents at end of year 83 45


1) During the year 2019, dividends amounting to EUR 164 million were distributed to the shareholder. The dividend per share amounted to EUR 1.20. In addition to the

dividend payment, the shareholder of the Company decided to a share premium repayment of EUR 586 million (EUR 2.08 per share).

2) During the year 2018, dividends amounting to EUR 286 million were distributed to the shareholder. The dividend per share amounted to EUR 2.09.

See also Note 29 to the consolidated accounts, Specifications of equity.

Consolidated Statement of changes In equity

Attributable to owner of the Company

Amounts in EUR million

Sharecapital and

premium

Reservefor

hedgesTranslation

reserveRetained earnings Total

Balance brought forward 2019 3,481 — — -485 2,996

Profit for the year — — — -214 -214

Cash flow hedges - changes in fair value — — — — —

Translation differences — — — — —

Income taxes related to other comprehensive income — — — — —

Total other comprehensive income for the year — — — — —

Total comprehensive income for the year — — — -214 -214

Dividends paid to owners — — — -164 -1641

Share premium repayment -586 — — — -5861

Total transactions with equity holders -586 — — -164 -750

Balance carried forward 2019 2,895 — — -863 2,032

Attributable to owner of the Company

Amounts in EUR million

Sharecapital and

premium

Reservefor

hedgesTranslation

reserveRetained earnings Total

Balance brought forward 2018 3,481 -2 -20 -410 3,049

Profit for the year — — — 211 211

Cash flow hedges - changes in fair value — 3 — — 3

Translation differences — — 20 — 20

Income taxes related to other comprehensive income — -1 — — -1

Total other comprehensive income for the year — 2 20 — 22

Total comprehensive income for the year — 2 20 211 233

Dividends paid to owners — — — -286 -2862

Share premium repayment — — — — —

Total transactions with equity holders — — — -286 -286

Balance carried forward 2018 3,481 — — -485 2,996


1 Company information 25

2 Important changes in the financial statements

compared with the preceding year 25

3 Accounting policies 25

4 Acquired and divested operations 27

5 Net sales 28

6 Impairment losses and reversed impairment losses 28

7 Other external expenses 30

8 Financial income 30

9 Financial expenses 30

10 Income taxes 30

11 Leasing 32

12 Intangible assets 33

13 Property, plant and equipment 35

14 Shares and participations owned by Vattenfall NV

and other Group companies 37

15 Participations in associated companies and

joint ventures 38

16 Inventories 38

17 Trade receivables and other receivables 39

18 Advance payments paid 39

19 Prepaid expenses and accrued income 39

20 Cash and cash equivalents 39

21 Interest-bearing liabilities 40

22 Pension 40

23 Provisions 40

24 Trade payables and other liabilities 41

25 Advance payments received 42

26 Accrued expenses and deferred income 42

27 Financial instruments 42

28 Financial risks 45

29 Specifications of equity 47

30 Contingent liabilities 48

31 Number of employees and personnel costs 48

32 Related party disclosures 49

33 Events after the balance sheet date 50

Notes to the consolidated accounts



Note 1 Company informationVattenfall N.V. is a public limited liability company, registered

in Amsterdam, the Netherlands. The most significant

activities of Vattenfall N.V. and its subsidiaries comprise

of the production and supply of electricity, gas, heat and

cooling to customers in the Netherlands, as well as a broad

portfolio of energy-saving products and services.

‘We’, ‘Vattenfall NV’ or ‘the Company’ or similar expressions

are used in these consolidated accounts as a synonym

for Vattenfall N.V. and its subsidiaries. ‘Vattenfall AB’,

‘the Parent’ or ‘the parent company’ are used in these

consolidated accounts as a synonym for Vattenfall AB

and its subsidiaries. Vattenfall NV originated in 2009 from

the unbundling of former parent company N.V. Nuon into

a production and supply company, N.V. Nuon Energy, and

a grid company, Alliander N.V. As a consequence of a

rebranding project, the statutory name of the Company

changed from N.V. Nuon Energy into Vattenfall NV. The

name became effective on 5 March 2019. Vattenfall NV

is registered at the Dutch Chamber of Commerce with

registration number 33292246.

Vattenfall AB, owned by the Swedish government, is the

sole shareholder of Vattenfall NV. The financial data of

Vattenfall NV is included in the consolidated accounts of

Vattenfall AB.

These consolidated accounts for the financial year 2019 are

authorised for publication by the Management Board and

Supervisory Board on 15 May 2020. Subsequently, these

consolidated accounts are scheduled to be adopted by the

general meeting of shareholders on 15 May 2020.

As the company income statement for 2019 of Vattenfall

NV is included in the consolidated accounts, a condensed

income statement has been disclosed in the company

accounts in accordance with Section 402, Book 2, of the

Dutch Civil Code.

Note 2 Important changes in the financial statements compared with the preceding year

Restatement of financial statements for 2018

No restatements are made.

Note 3 Accounting policies

Conformity with standards and regulations The consolidated accounts have been prepared in

accordance with the International Financial Reporting

Standards (IFRS) issued by the International Accounting

Standards Board (IASB) as well as the interpretations

issued by the IFRS Interpretations Committee (IFRS IC) as

endorsed by the European Commission for application

within the EU.

New IFRSs and interpretations effective as from 2019 Presented below are the new accounting standards

that have a material impact on Vattenfall NV’s financial

statements.

IFRS 16 – “Leases”

IFRS 16 – “Leases“ replaces IAS 17 – “Leases” along with the

accompanying interpretations. IFRS 16 became effective

as from 1 January 2019. Vattenfall NV has transitioned

into the new leasing standard by applying the modified

retrospective approach, and therefore the 2018 financial

statements are not restated. Starting 1 January 2019, a

right-of-use asset along with a lease liability is recognised

on the balance sheet for all lease contracts except for

leases for which the underlying asset is of low value and

short-term leases. Short-term leases are leasing contracts

with a duration of 12 months or less.

As per 1 January 2019, a lease liability is recognised for

leases that were previously classified as operating leases

through application of IAS 17. The lease liability is measured

as the present value of the remaining lease payments

discounted by Vattenfall NV’s currency and term specific

incremental borrowing rate as per 1 January 2019. The right-

of-use asset is recognised initially at the same value as the

lease liability. In the income statement, the lease expenses

are replaced by depreciation of the right-of-use asset and

interest expense on the lease liability. The implementation

of IFRS 16 also entails a positive effect on operating cash

flows and a negative effect on cash flow from financing

activities.

The implementation of IFRS 16 resulted in a higher EBITDA

by EUR 31 million and in a higher interest expense by EUR

1 million in 2019, compared with previous years accounting

under IAS 17 where all cost for operational lease contracts

were accounted for in operating profit.



Lease liabilities as per 1 January 2019 amounted to EUR

98 million. The difference between the operating lease

commitment as per 31 December 2018 according to IAS 17

and lease liabilities as per 1 January 2019 according to IFRS

16 is shown below:

Operating lease commitment as per 31 December

2018 (See note 11) 118

Recognition exemption for short-term leases and leases of low-value assets -13

Effect of discounting operating lease commitment -7

Lease liabilities as a result of IFRS 16 implementation 98

Finance lease liabilities recognised as per 31 December 2018 —

Lease liabilities as per 1 January 2019 98

Definition of a lease

Vattenfall NV applies the definition under IFRS 16 to

determine whether or not a contract contains a lease.

As a lessee

Under IAS 17, Vattenfall NV classified leases as either

operating leases or finance leases. Under IFRS this

distinction is no longer made for lessees. A right-of-use

asset along with a corresponding liability are created for all

lease contracts except for leases for which the underlying

asset is of low value and short-term leases.

New IFRSs and interpretations effective as from 2020 and later A number of accounting standards and interpretations have

been published, but have not become effective. These are

not considered to have a material impact on Vattenfall NV’s

financial statements.

Basis of measurement Assets and liabilities are reported at cost or amortised cost,

with the exception of certain financial assets and liabilities

and inventories held for trading, which are measured at

fair value. Fair value is defined as the price that would be

received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the

measurement date. Vattenfall uses valuation methods that

reflect the fair value of an asset or liability appropriately.

Financial assets and liabilities that are measured at fair

value are described below according to the fair value

hierarchy (levels), which in IFRS 13 is defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for

identical assets or liabilities

• Level 2: Inputs other than quoted prices included in

Level 1 that are observable for the asset or liability, either

directly (that is, as prices) or indirectly (that is, derived

from prices).

• Level 3: Inputs for the asset or liability that is not based on

observable market data (that is, unobservable inputs)

Classification into a level is determined by the lowest level

input that is significant for the measurement of the fair value

at the end of a reporting period. Vattenfall NV assesses

whether reclassifications between the levels are necessary.

Observable input data are used whenever possible and

relevant. For assets and liabilities included in Level 3, fair

value is modelled either on the basis of market prices with

adjustments that consider specific terms of a contract, or

on the basis of unobservable inputs such as future cash

flows. The assumptions for the estimated cash flows are

monitored on a regular basis and adjusted if necessary.

Functional and presentation currencies The functional currency is the currency of the primary

economic environment in which each Vattenfall NV’s entity

operates. The Company’s functional currency is Euro (EUR),

which is also the presentation currency of both Vattenfall

NV’s consolidated and company financial statements. This

means that the financial statements are presented in Euro.

Unless otherwise stated, all figures are rounded off to the

nearest million Euro (EUR million).

Significant accounting policies The accounting policies of the Group described below and

in each respective note to the consolidated accounts have

been applied consistently for all periods presented in the

consolidated financial statements.

Principles of consolidation The consolidated financial statements cover Vattenfall NV,

subsidiaries, associated companies and joint ventures and

joint arrangements that are reported as a joint operation

according to IFRS 11.

Subsidiaries

Subsidiaries are all entities over which Vattenfall NV has

control. Control is considered to exist when the following

three criteria are met: (1) the investor is exposed to or is

entitled to a variable return from the investment, (2) the

investor has the opportunity to influence the return through

its opportunity to govern the company, and (3) there is a link

between the return that is received and the opportunity to

govern the company. By influence is meant the rights that

allow the investor to govern the relevant business, that is,

the business which significantly influences the company’s

return. Business combinations are accounted for using the

purchase method. Subsidiaries’ financial statements, which

are prepared in accordance with the Company’s accounting

policies, are included in the consolidated accounts from the

point of acquisition to the date when control ceases.

Joint ventures

A joint venture is a type of joint arrangement whereby

the parties that have joint control of the arrangement

have rights to the net assets of the joint venture. Joint



control is the contractually agreed sharing of control of

an arrangement, which exists only when decisions about

the relevant activities require the unanimous consent of

the parties sharing control. Joint ventures are reported in

accordance with the equity method.

Associated companies

Associated companies are companies in which Vattenfall NV

has a significant – but not controlling – influence with other

owners over their operational and financial management,

usually through shareholdings corresponding to between

20% and 50% of the votes. From the point at which the

significant influence is acquired, participations in associated

companies are reported in the consolidated accounts in

accordance with the equity method.

Transactions that are eliminated upon consolidation

Intragroup receivables and liabilities, income and

expenses, as well as gains or losses arising from intragroup

transactions between Vattenfall NV companies, are

eliminated in their entirety when preparing the consolidated

accounts. Gains arising from transactions with associated

companies and joint ventures are eliminated to an extent

that corresponds to Vattenfall NV’s holding in the company.

Losses are eliminated in the same manner as gains, but are

treated as an indicator of impairment.

Foreign currenciesTransactions in foreign currencies

Transactions in foreign currencies are translated to the

functional currency at the exchange rate on the day of the

transaction. On the balance sheet date, monetary assets

and liabilities in foreign currencies are translated to the

functional currency at the exchange rate applicable on

that day. Exchange rate differences arising from translation

of currencies are reported in the income statement.

Operationally derived exchange gains and losses are

shown under Other operating income and Other operating

expenses, respectively. Financially derived exchange gains

and losses are shown as Financial income and Financial

expenses, respectively.

Important estimations and assessments in the preparation of the financial statementsPreparation of the financial statements in accordance with

IFRS requires the Company’s executive management and

board of directors to make estimations and assessments as

well as to make assumptions that affect application of the

accounting policies and the reported amounts of assets,

liabilities, income and expenses. These estimations and

assessments are based on historic experience and other

factors that seem reasonable under current conditions.

The results of these estimations and assessments are then

used to establish the reported values of assets and liabilities

that are not otherwise clearly documented from other

sources. The final outcome may deviate from the results of

these estimations and assessments. The estimations and

assessments are revised on a regular basis. The effects of

changes in estimations are reported in the period in which

the changes were made if the changes affected this period

only or in the period the changes were made and future

periods if the changes affect both the current period and

future periods.

Important estimations and assessments are described

further in the following notes to the consolidated accounts:

• Note 10 Income taxes

• Note 12 Intangible assets

• Note 13 Property, plant and equipment

• Note 23 Provisions

Note 4 Acquired and divested operations

Acquired operationsAcquisitions in 2019

At the end of February 2019, Vattenfall NV finalised the

acquisition of 100% of the Dutch electricity and gas sales

company DELTA Energie B.V. through acquiring all (voting)

shares. DELTA Energie B.V. supplies green electricity and

gas to households and small and medium-sized companies,

mainly in the Dutch province Zeeland. The company has

about 120 employees and 170,000 customers.

The fair value of the identifiable assets and liabilities, at the

date of acquisition, amounts to EUR 78 million. The material

identifiable assets and liabilities are the recognition of an

intangible asset, representing the customer list, of EUR 105

million and the related deferred tax liability of EUR 24 million.

The purchase consideration was paid in cash and there is

no contingent consideration. The acquisition did not give

rise to goodwill on acquisition date.

At the end of March 2019, Vattenfall finalised the acquisition

of the Dutch company Senfal B.V. Senfal B.V. is a company

that offers innovative software services to large industrial

customers, wind and solar farms and owners of large

batteries.

Acquisitions in 2018

In September 2018 Vattenfall NV acquired the shares of

Zonnepark Gasselternijveen B.V. and Zonnepark Coevorden B.V.

Divested operationsDivestments in 2019

No divestments took place in 2019.



Divestments in 2018

In August 2018 Vattenfall NV sold the UK Wind entities

to Vattenfall AB. The carrying amount of these divested

entities amounted to EUR 139 million. Taking into

consideration the release of the translation reserve the

capital gain of this sales transaction amounted to EUR 33

million. The consideration received for the transfer of the

shares in UK Wind amounted to EUR 193 million.

Note 5 Net sales

Accounting policyNet sales include sales proceeds from sales of electricity,

heat and gas, energy trading and other revenues. Materially

all revenues are generated in the Netherlands.

Vattenfall NV offers customers discounts and bonuses

on sale of both electricity, gas and heat through various

campaigns. The Company recognises discounts and

bonuses when the performance obligation to the customer

is satisfied and are recognized over the contract term.

Various sales channels are used to sell Vattenfall NV’s

products which gives rise to different types of costs

associated with sales activities. These costs to obtain a

contract related to revenues from contracts with customers

are shown under Note 12. Capitalisation of costs to obtain is

either based on a portfolio approach (BtC) or a contract by

contract approach (BtB). BtC applied practical expedients

by which all contracts with a duration of more than 1 year

are deemed one portfolio and costs to obtain a contract

associated to 1 year contracts are expensed when incurred.

The amortisation schedule depends on the contract

duration by taking into consideration the probability that

customers terminate their contract prior to the end of the

contractually agreed period.

Sales and distribution of electricity, heat and gas

Sales of electricity, heat and gas and related distribution

are recognised as revenue at the time of delivery, excluding

value-added tax and excise taxes. Depending on the

system for metering of consumption, Vattenfall recognises

revenues either based on expected consumption, with a

reconciliation when the readout takes place, or based on

actual consumption and adjusted for back-delivery.

Connection fees

Heat is responsible for physical connections of the Heating

networks to houses and buildings. The fee for the physical

connection is paid by the customer when the connection

is established. Revenue from connection fees is recognised

over time since Vattenfall NV handles maintenance and

repairs of the assets used in the physical connection, which

is satisfied over time. The basis for revenue recognition of

connection fees is the useful life of the underlying assets.

Vattenfall NV recognises revenues from contracts with

customers and other revenues through profit or loss.

2019 2018

Sales of electricity 1,137 971

Sales of gas 1,197 1,184

Sale of heat and steam 176 165

Service and consulting 286 284

Other Revenues 36 15

Total Revenues 2,832 2,619

Revenue from contracts with customers is recognised

when the performance obligation is satisfied. The company

applies the practical expedient not to disclose information

for performance obligations if the performance obligation

is part of a contract that has an original duration of one year

or less.

The payment recognised may not match the revenue for

the period, which results in the recognition of contract

assets and contract liabilities. The company applies

the practical expedient not to adjust for the effects of a

significant financing component if it is expected that, at

inception, the period between satisfying the performance

obligation and the payment will be one year or less.

Contract balances 2019 2018

Contract assets 6 —

– of which, released as cost from opening balance during the year 2 —

Contract liabilities 220 225

– of which, released as revenue from opening balance during the year 8 8

Contract liabilities relate to cashbacks, obligations resulting

from loyalty programs and construction contributions

received. Construction contributions received are mainly

attributable to district heating grids. The amortisation

periods of these received amounts are equal to the

depreciation periods of the underlying assets with a

maximum of 30 years.

Note 6 Impairment losses and reversed impairment losses

Accounting policyGeneral principles

Assessments are made throughout the year for any indication

that an asset may have decreased in value. If there is an

indication of this kind, the asset’s recoverable amount is

estimated. For intangible assets that are still not ready for use,

the recoverable amount is calculated at least annually or as

soon there is an indication that an asset has decreased in value.

If the essentially independent cash flow for an individual

asset cannot be established for the assessment of any



need for impairment, the assets must be grouped at the

lowest level where it is possible to identify the essentially

independent cash flow (a so-called cash-generating unit).

An impairment loss is reported when an asset or cash-

generating unit’s reported value exceeds the recoverable

amount. Any impairment loss is recognised in profit or loss.

Impairment of assets attributable to a cash-generating unit

is allocated primarily to goodwill. Thereafter, a proportional

impairment loss is conducted of other assets that are part

of the unit.

Calculation of the recoverable amount

The recoverable amount is the higher of fair value less

costs to sell and value in use. When calculating value in use,

the future cash flow is discounted by a discounting rate

that takes into consideration risk-free interest and the risk

associated with the specific asset.

Reversal of impairment losses

Impairment of goodwill is never reversed. Impairment of

other assets is reversed if a significant and lasting change

has occurred in the assumptions that formed the basis for

the calculation of the recoverable amount. An impairment

loss is reversed only if the asset’s carrying amount after

reversal does not exceed the carrying amount that the

asset would have had if the impairment loss had not been

recognised.

Financial informationProcess for impairment testing

The main assumptions that executive management has

used in calculating projections of future cash flows in

cash-generating units with finite useful lives are based on

forecasts of the useful life of the respective assets. The

projected cash flows are based on market prices and

on Vattenfall’s long-term market outlook. The calculated

revenues in these forecasts are based on Vattenfall’s

long-term pricing projections, which are the result of a

large number of simulations of the prices of oil, coal, gas,

electricity and CO2 emission allowances in the relevant

commodity markets. The long-term market outlook is

based on internal and external input parameters and is

benchmarked against external price projections. Based on

the price assumptions, the dispatch of the power plants is

calculated, taking technical, economic and legal constraints

into consideration. Technical flexibility of the assets, that is

the ability to adapt generation to changes in spot market

prices, has been taken into account. Cash flow projections

of other cash-generating units are based on the business

plan for the coming five years, after which their terminal

value is taken into account, based on a growth factor of

0%-0.5% (0%-0.5%). If the final year of the business plan

horizon does not represent reasonable basis for assessing

long-term value, an extended forecast may be required

to arrive at a steady-state earnings situation on which to

calculate the terminal value.

Future cash flows have been discounted to value in use

using the following discount rates:

Discount rate Thermal Power

2019 2018

Before tax After tax Before tax After tax

8.2% 6.9% 8.0% 7.0%

The discount rate varies for the various asset classes,

depending on their risk. When setting the discount rate,

consideration has been given to the extent of exposure this

has for changes in wholesale prices of electricity, fuel, CO2

emission allowances, and regulatory risks. An increase in

the discount rate by 0.5 percentage points would decrease

the estimated value in use for the cash-generating unit

Thermal Power by approximately EUR 116 million (110).

On the other hand a decrease in the discount rate by 0.5

percentage points would increase the estimated value

in use for the cash-generating unit Thermal Power by

approximately EUR 141 million (132).

Electricity prices and margins for generation assets

represent another major value driver. The most important

production margins are the “clean spark spread” for gas-

fired power plants and the “clean dark spread” for hard

coal-fired power plants. Those spreads include electricity

prices as well as the respective cost for fuel and CO2

emission allowances to produce the electricity, considering

fuel type and efficiency factors. Based on the assumptions

used in the impairment testing, a reduction of 5% in future

margin would decrease the estimated value in use for the

cash-generating unit Thermal Power segment by 8% or

approximately EUR 136 million.

Vattenfall NV has performed impairment testing by

calculating the value in use of the cash-generating units.

The structure of the cash-generating units, which represent

the smallest group of identifiable assets that generate

continuous cash inflows that are largely independent

of other assets or groups of assets, is based on the

Company's Business Area structure.

Vattenfall NV closely monitors market developments on a

continuous basis and their impact on operations.

In addition to the regular impairment test for the Cash

Generating Units, Vattenfall recognises impairment losses

for individual assets if these are planned to be divested and

the expected consideration is below the carrying amount.

No previously recognised impairment losses were reversed

in the income statement in 2019.



Impairment losses 2019

Impairment losses charged against operating result in

2019 amounted to EUR 68 million and mainly related to

the closing, in line with the decision of and agreement with

the Dutch government, of the Company’s coal-fired power

plant, Hemweg 8. The related assets have been impaired

to nil based on the estimate to the fair value less costs of

disposal. The fair value less costs of disposal has been

estimated based on expected proceeds, which represents

a level 3 valuation.

Impairment losses 2018

Impairment losses charged against operating result in 2018

amounted to EUR 11 million.

Note 7 Other external expenses2019 2018

Purchased services 136 161

IT expenses 22 21

Consulting expenses 81 72

Non-capitalised lease expenses 12 33

Marketing and selling expenses 43 29

Other 82 116

Total 376 432

Note 8 Financial income

Accounting policyInterest income is reported as it is earned. The calculation

is made on the basis of the return on underlying assets in

accordance with the effective interest method. Dividend

income is reported when the right to receive payment is

established. Interest income is adjusted for transaction

costs and any rebates, premiums and other differences

between the original value of the receivable and the

amount received when due.

Financial information2019 2018

Interest income 2 6

Total 2 6

Note 9 Financial expenses

Accounting policyFor calculation of interest effects attributable to provisions,

discount rates have been used, see Note 23 to the

consolidated accounts, Provisions, for the discount rates

used. Issue costs and similar direct transaction costs for

raising loans are distributed over the term of the loan in

accordance with the effective interest method. Borrowing

costs directly attributable to investment projects in non-

current assets which take a substantial period of time to

complete are not reported as a financial expense but are

included in the cost of the non-current asset during the

construction period. Leasing fees pertaining to finance leases

are distributed between interest expense and amortisation of

the outstanding debt. Interest expenses are distributed over

the leasing period so that each accounting period is charged

in the amount corresponding to a fixed interest rate for the

reported debt in each period. Variable fees are carried as an

expense in the period in which they arise.


Interest expenses attributable to loans 4 10

Interest effects attributable to provisions 1 1

Total 5 11

Interest expenses, attributable to lease liabilities, amount

to EUR 1 million and are included in interest expenses

attributable to loans.

Note 10 Income taxes

Accounting policyIncome taxes comprise current tax and deferred tax.

Income tax is reported in the income statement except

when the underlying transaction is reported in Other

comprehensive income or in Equity, whereby also the

associated tax effect is reported in Other comprehensive

income and Equity, respectively.

Current tax is tax to be paid or received for the current year,

with the application of the tax rates that are established

or, established in practice as of the balance sheet date.

Adjustments of tax paid attributable to previous periods are

also included in this.

Deferred tax is calculated in accordance with the balance

sheet method on the basis of temporary differences

between the reported and taxable values of assets and

liabilities. The valuation of deferred tax is based on how

the reported value of assets or liabilities is expected to be

realised or settled. Deferred tax is calculated in accordance

with the tax rates and tax rules that have been established or

have been established in practice by the balance sheet date.

Important estimations and assessmentsDeferred tax positions concerning non-deductible

temporary differences and tax-loss carry forwards are

recognised to the extent that the realisation of the related

tax benefit through future taxable profits is assessed as



remain unchanged in the countries in which Vattenfall NV is

active, and that applicable rules for exercising tax loss carry

forwards will not be changed. The value of deferred tax

positions is reduced when it is no longer considered likely

that they can be utilised.


2019 2018

% %

Result before tax -303 296

Dutch income tax rate at 31 December 25.0 76 25.0 -74

Difference in tax rate in foreign operations -0.3 -1 0.4 -1

Tax adjustments for previous periods 0.1 — -1.2 4

Non-taxable income 0.5 2 -3.4 10

Revaluation of previously non-valued losses and other temporary differences 0.0 — -0.3 1

Non-deductible expenses -0.1 — 0.1 —

Energy investment allowance 1.9 6 -0.5 1

Changes in tax rates 1.4 4 8.3 -25

Other 0.8 2 0.2 -1

Effective tax rate 29.3 89 28.6 -85

2019 2018

Current tax expense (-)/ tax income (+) -8 -29

Adjustment of current tax expense (-) / tax income (+) for prior periods -4 4

Deferred tax expense (-)/ tax income (+) 101 -60

Total income tax expense 89 -85

Financial informationBreakdown of the reported income tax

The difference between the nominal Dutch tax rate and the effective tax rate is explained as follows:

2019 2018

Balance brought forward net asset (+)/ net liability (-) 19 5

Reclassification — 14

Acquired companies -1 —

Divested companies including liabilities associated — -9

Change via income statement -12 -25

Taxes paid, net 13 34

Reclassification to/from other receivables/liabilities -2 —

Balance carried forward net asset (+)/ net liability (-) 17 19

Balance sheet reconciliation of current tax

probable. The recognition of deferred tax assets is assessed

annually. This assessment is mainly based on the business

plan for the coming five years and on the assumption that

future earnings after five years will be consistent with the

business plan, that applicable tax laws and tax rates will

2019 2018

Property, plant and equipment 145 178

Intangible assets -12 4

Non-settled derivatives 31 -73

Settled derivatives — 1

Provisions 7 6

Liabilities 20 —

Other 2 -1

Total 193 115

Breakdown of the deferred tax


the straight-line method from the commencement date to

the earlier of the end of the useful life of the right-of-use asset

or the end of the lease term, while the leasing payments are

reported as interest and amortisation of the debts.

The lease liability is initially measured at the present value

of the lease payments outstanding at the commencement

date, discounted using Vattenfall NV’s incremental borrowing

rate. After the commencement date, the amount of lease

liabilities increases to reflect the accretion of interest and is

reduced for the lease payments made. The commitment to

pay future leasing charges is reported as a non-current or

current liability.

Lease payments included in the measurement of the lease

liability comprise:

• Fixed payments

• Variable lease payments that depend on an index or rate

• Amounts expected to be payable under a residual value

guarantee

• The exercise price under a purchase option that Vattenfall

NV is reasonably certain to exercise, lease payments in

an optional renewal period, if Vattenfall NV is reasonably

certain to exercise an extension option, and penalties

for early termination of a lease unless Vattenfall NV is

reasonably certain not to terminate early.

Assets leased out

Assets that are leased out under finance leases are not

reported as property, plant and equipment, since the risks

associated with ownership are transferred to the lessee.

Instead, a financial receivable is entered for the future

minimum lease payments.

Assets leased out under operating leases are reported as

property, plant and equipment and are subject to depreciation.

Leased property, plant and equipmentAs a lessee

Vattenfall NV leases different assets, including but not limited

to land within BA Wind, office buildings, vehicles and other.

More detailed information on leases for which the Company

is a lessee is presented below.

The deferred tax positions for property, plant and

equipment and intangible assets mainly represent the

differences between the carrying amount and the tax base

of the power-generating facilities and IFRS 16 right-of-use

and are recorded at statutory tax rates. The deferred tax

positions in respect of derivatives reflect the temporary

differences – measured at the prevailing tax rate – between

the valuation of derivatives for tax purposes and the

valuation in the consolidated accounts. The deferred tax

position for liabilities mainly represent the differences

between carrying amount and tax base IFRS 16 leases.

The difference between de movement in the net deferred

tax position in 2019 and the net deferred tax income in the

consolidated income statement is mainly caused by the PPA

of DELTA Energie B.V. which resulted in a deferred tax liabilty

position of about EUR 23 million with no effect on income.

Unrecognised deferred tax assets

Unrecognised deferred tax assets relate to the temporary

differences in the valuation of tax losses carried forward

and amount to EUR 2 million (2). These tax losses

carried forward relate to losses in the Netherlands where

insufficient taxable profit is considered to be available in the

foreseeable future to recognise the losses carried forward.

The tax losses up to and including 2018 in the Netherlands

expire in the coming 1-8 years. The tax losses from 2019

onwards in the Netherlands expire after 6 years.

Note 11 Leasing

Accounting policyLeased assets

A right-of-use asset along with a lease liability are

recognised on the balance sheet for all lease contracts

except for leases for which the underlying asset is of low

value or if the contract duration is 12 months or less. For

these types of lease contracts the practical expedient is

applied and by which costs incurred are expensed directly.

The right-of-us-asset is initially measured at cost, which

comprises the initial amount of the lease liability adjusted for

any lease payments made at or before the commencement

date, plus any initial direct cost incurred and an estimate of

costs to dismantle and remove the underlying asset.

The right-of-use asset is subsequently depreciated using

Right-of-use-assets Land Buildings Vehicles Other Total

Balance as of 1 January 21 29 11 38 99

Depreciation for the year -2 -9 -4 -17 -32

Additions to the right of use asset during the year — 1 3 9 13

Other changes to the right of use asset during the year — -1 -1 — -2

Balance carried forward 19 20 9 30 78


Lease liability development

Balance as of 1 January 99

Additions to the liability 14

Repayment of the liability -30

Balance carried forward 83

Total leasing related cash-outflows amounted to EUR 31

million in 2019 of which EUR 1 million is related to interest

expenses.

Maturity analysis - contractual undiscounted cash flows

< 1 year 29

1 - 5 years 43

> 5 years 14

Total as of 31 December 2019 86

Lease payments amounting to EUR 12 million have not

been capitalised as a result of the practical expedients

relating to short-term contracts and low value items or

because they related to variable components of contracts.

Leasing revenues

Leasing revenues and future receivables relate mainly to

leases of production facilities and heating equipment to

consumers. On 31 December 2019, cost of assets reported

under operating leases amounted to EUR 524 million (509).

Accumulated depreciation amounted to EUR 334 million

(308) and accumulated impairment losses amounted to

EUR 22 million (25).

Future leasing related cash-inflows for this type of facility are

broken down as follows

Operating leasing

2020 102

2021 100

2022 97

2023 94

2024 92

2025 and beyond 104

Total 589

The district heating grids belonging to Alliander N.V.

which had been placed within a cross-border lease, were

subleased to Vattenfall Warmte N.V., which is part of

Vattenfall NV, as of mid-2008 until 2020. This was done in

connection with the implementation of the Independent

Network Operation Act (WON) and preparations for the

unbundling of our former shareholder N.V. Nuon. The strip

risk (the part of the termination value, i.e. the possible

compensation payable by Vattenfall NV to Alliander N.V.

in the event of premature termination of the transaction,

that cannot be settled from the deposits and investments

held for this purpose) related to these subleased assets is

borne by Vattenfall NV and amounted to USD 22 million

as of 31 December 2019 (31). As these subleases are still

operational, no liability for this strip risk is included on the

balance sheet.

Note 12 Intangible assets

Accounting policyIntangible assets

Intangible assets such as concessions, patents, licences,

trademarks and similar rights as well as renting rights

are reported at cost less accumulated amortisation and

impairment losses.

Principles for amortisation

Amortisation of intangible assets other than goodwill is

reported on a straight-line basis in the income statement

over the estimated useful life of the asset, provided the

useful life is not indefinite.

Important estimations and assessmentsIntangible assets are tested for impairment in accordance

with the accounting policies described in Note 6 to the

consolidated accounts, Impairment losses and reversed

impairment losses. The recoverable amount for cash-

generating units is determined by calculating the value in

use or fair value less costs to sell. For these calculations,

certain estimations must be made regarding future cash

flows along with other adequate assumptions regarding the

required rate of return, for example.


2018

Concessions,customer lists

and similar rights with finite useful lives

Cost to obtain a contract Total

Cost

Cost brought forward 213 39 252

Acquired companies — — —

Investments 6 26 32

Divestments/disposals — -4 -4

Accumulated cost carried forward 219 61 280

Amortisation according to plan

Amortisation brought forward -19 -14 -33

Acquired companies — — —

Amortisation for the year -3 -15 -18

Divestments/disposals — 4 4

Accumulated amortisation according to plan carried forward -22 -25 -47

Impairment losses

Impairment losses brought forward -52 — -52

Impairment losses for the year -8 -3 -11

Divestments/disposals — — —

Accumulated impairment losses carried forward -60 -3 -63

Carrying amount according to plan carried forward 137 33 170

Estimated useful life

Concessions, customer lists and similar rights 1-63 years

Costs to obtain a contract 2-3 years

Estimated useful lives are unchanged compared with the

preceding year.

Financial information

2019

Concessions,customer lists

and similar rights with finite useful lives

Cost to obtain a contract Total

Cost

Cost brought forward 219 61 280

Acquired companies 124 2 126

Investments 2 21 23

Divestments/disposals -11 -7 -18

Accumulated cost carried forward 334 77 411

Amortisation according to plan

Amortisation brought forward -22 -25 -47

Acquired companies -16 — -16

Amortisation for the year -13 -20 -33

Divestments/disposals — 7 7

Accumulated amortisation according to plan carried forward -51 -38 -89

Impairment losses

Impairment losses brought forward -60 -3 -63

Impairment losses for the year — — —

Divestments/disposals 8 — 8

Accumulated impairment losses carried forward -52 -3 -55

Carrying amount according to plan carried forward 231 36 267


Note 13 Property, plant and equipment

Accounting policyProperty, plant and equipment are reported as assets on the

balance sheet if it is likely that there will be future financial

benefit for the company and the cost of the asset can be

calculated in a reliable manner. Cost includes the purchase

price and costs directly attributable to putting the asset in

place and in a suitable condition for use in accordance with

the management’s intention of the acquisition. Examples of

directly attributable expenses included in cost are delivery

and handling, installation, land registration and consulting

services. Borrowing costs directly attributable to investment

projects in property, plant and equipment, which take a

substantial period of time to complete, are included in the

cost of the asset during the construction period.

Subsequent costs

Subsequent costs for property, plant and equipment are

only added to the acquisition cost if it is likely that there

will be future financial benefits associated with the asset

for the company and the cost can be calculated in a

reliable manner. All other subsequent costs are reported as

expenses in the period when they arise. What is decisive

for the assessment when a subsequent cost is added

to the acquisition cost is whether the cost concerns the

replacement of identified components, or parts of them,

whereby such costs are capitalised. Also, in cases where

new components are created, the cost is added to the cost

of the asset. Any undepreciated reported values of replaced

components, or parts of components, are retired and

carried as an expense in connection with the replacement.

Repairs and maintenance are expensed as incurred.

Depreciation principles

Depreciation is reported on a straight-line basis in the

income statement over the estimated useful life of the

asset. The Company applies component depreciation,

which means that the components’ estimated useful

life provides the basis for the straight-line depreciation.

Estimated useful life is described below in this note.

Assessments of the residual value and useful life of an

asset are conducted annually. Land and water rights are

not subject to depreciation.

Important estimations and assessmentsProperty, plant and equipment are tested for impairment

in accordance with the accounting policies described in

Note 6 to the consolidated accounts, Impairment losses

and reversed impairment losses. The recoverable amount

for cash-generating units is determined by calculating

the value in use or fair value less costs to sell. For these

calculations, certain estimations must be made regarding

future cash flows along with other adequate assumptions

regarding the required rate of return, for example.

Estimated useful life

Hydro power installations 5-40 years

Combined heat and power installations 5-40 years

Wind power installations 10-25 years

Solar power installations 5-25 years

Office and warehouse buildings and workshops 25-50 years

Office equipment 5-10 years

Estimated useful lives are unchanged compared with the

preceding year.


2018

Land and buildings1

Plant and machinery and other technical

installations

Equipment, tools, fixtures

and fittingsConstruction

in progress Total

Cost

Cost brought forward2 54 5,455 523 118 6,150

Adoption of new accounting standard (IFRS 16) — — — — —

Acquired companies — — — — —

Investments3 1 10 -6 191 196

Capitalised/reversed future expenses for decommissioning, restoration

6 2 — — 8

Transfer from construction in progress — 94 16 -110 —

Divestments/disposals — -11 -12 — -23

Assets held for sale — — — — —

Divested companies — -466 — -3 -469

Accumulated cost carried forward 61 5,084 521 196 5,862

Depreciation according to plan

Depreciation brought forward -17 -1,362 -329 — -1,708

Acquired companies — — — — —

Depreciation for the year -2 -133 -17 — -152

Divestments/disposals — 7 8 — 15


Divested companies — 61 — — 61

Accumulated depreciation according to plan carried forward -19 -1,427 -338 — -1,784

Impairment losses

Impairment losses brought forward -14 -2,146 -30 — -2,190

Impairment losses for the year — — — — —


Accumulated impairment losses carried forward -14 -2,146 -30 — -2,190

Carrying amount according to plan carried forward 28 1,511 153 196 1,888

1) Cost for land and buildings includes cost of land rights amounting to EUR 1 million (1), which are not subject to depreciation.

2) Government grants received, balance brought forward, amount to EUR 66 million (65).

3) Government grants received during the year amounted to EUR -1 million (2).


2019

Land and buildings1

Plant and machinery and other technical

installations

Equipment, tools, fixtures

and fittingsConstruction

in progress Total

Cost

Cost brought forward2 61 5,084 521 196 5,862

Adoption of new accounting standard (IFRS 16) 50 — 49 — 99

Acquired companies 1 — 9 1 11

Investments3 1 10 10 303 324

Capitalised/reversed future expenses for decommissioning, restoration 2 9 — — 11

Transfer from construction in progress 2 103 4 -109 —

Divestments/disposals -4 -4 -60 — -68

Assets held for sale — -41 — — -41

Divested companies — — — — —

Accumulated cost carried forward 113 5,161 533 391 6,198


Depreciation brought forward -19 -1,427 -338 — -1,784

Acquired companies — — -5 — -5

Depreciation for the year -11 -120 -40 — -171

Divestments/disposals — 1 57 — 58

Assets held for sale — 27 — — 27

Divested companies — — — — —

Accumulated depreciation according to plan carried forward -30 -1,519 -326 — -1,875

Impairment losses

Impairment losses brought forward -14 -2,146 -30 — -2,190

Impairment losses for the year — -60 -8 — -68

Assets held for sale — 11 — — 11

Accumulated impairment losses carried forward -14 -2,195 -38 — -2,247

Carrying amount according to plan carried forward 69 1,447 169 391 2,076


1) Vattenfall NV has issued a declaration of liability for these subsidiaries. A complete list of subsidiaries, associated companies and joint ventures, as required by

sections 379 and 414 of Book 2 Title 9 of the Dutch Civil Code, is filed with the Chamber of Commerce in Amsterdam.

Note 14 Shares and participations owned by Vattenfall NV and other group companies

The following list includes the significant subsidiaries,

associated companies and joint ventures and the share

that Vattenfall NV holds in these entities.

Registered officeParticipation

in % 2019Participation

in % 2018

Netherlands

Vattenfall Energy Sourcing Netherlands N.V.1 Amsterdam 100 100

Vattenfall Power Generation Netherlands B.V.1 Amsterdam 100 100

Nuon Storage B.V. Amsterdam 100 100

Vattenfall Duurzame Energie N.V.1 Amsterdam 100 100

Vattenfall Wind Development Netherlands B.V.1 Amsterdam 100 100

Vattenfall Windpark Wieringermeer B.V. Amsterdam 100 100

Vattenfall Windpark Wieringermeer EXT B.V. Amsterdam 100 100

Vattenfall Customers & Solutions Netherlands N.V.1 Amsterdam 100 100

Vattenfall Eemshaven B.V.1 Amsterdam 100 100

Vattenfall Energy Trading Netherlands N.V.1 Amsterdam 100 100

Vattenfall Warmte N.V.1 Amsterdam 100 100

Vattenfall Sales Nederland N.V.1 Amsterdam 100 100

Ingenieursbureau Ebatech B.V.1 Amsterdam 100 100

Vattenfall Klantenservice N.V.1 Arnhem 100 100

Nuon Epe Gas Service B.V.1 Amsterdam 100 100

Feenstra N.V.1 Amsterdam 100 100

Feenstra Veiligheid B.V.1 Amsterdam 100 100

Feenstra Verwarming B.V.1 Lelystad 100 100

Zuidlob Wind B.V.1 Amsterdam 100 100

powerpeers B.V.1 Amsterdam 100 100

Vattenfall Samen in Zon B.V. Amsterdam 100 100

Vattenfall Hollandse Kust Zuid 1&2 C.V. Amsterdam 100 100

Vattenfall Hollandse Kust Zuid 3&4 C.V. Amsterdam 100 100

Senfal B.V. Amsterdam 100 -

Delta Energie B.V.1 Middelburg 100 -

Windpark Slufterdam West B.V.1 Amsterdam 100 100

V.O.F. Omgevingsvergunning Windpark Slufterdam Rotterdam 50 50

Germany

Nuon Epe Gasspeicher GmbH Heinsberg 100 100

Shares and participations owned by Vattenfall NV


Note 15 Participations in associated companies and joint ventures

Shares and participations owned by the Company or by other group companies

Carrying amount

Registered office

Participation in % 2019 2019 2018

Associated companies and joint ventures owned by Vattenfall NV

Netherlands

B.V. Nederlands Elektriciteit Administratiekantoor Amsterdam 23 7 7

NoordzeeWind C.V. IJmuiden 50 4 8

Westpoort Warmte B.V. Amsterdam 50 14 10

Other associated companies and joint ventures 3 6

Total 28 31

The activities of the joint ventures and associated

companies mainly relate to the construction and operation

of wind farms and heat grids. The joint ventures and

associated companies have no other significant contingent

liabilities or commitments as at 31 December 2019 and

2018, except for those disclosed in Note 30.

Vattenfall has issued a series of loans to Westpoort Warmte

B.V., totaling EUR 46 million (46) against an average interest

rate of 1.8% (1.6%).

Participations in the results of associated companies

2019 2018

Netherlands

B.V. Nederlands Elektriciteit Administratiekantoor 1 -1

NoordzeeWind C.V. -4 -4

Westpoort Warmte B.V. 4 3

Other associated companies and joint ventures 1 1

Total 2 -1

These joint ventures and associated companies cannot

distribute their profits without the consent of the other

investors in the relevant joint venture or associated

company.

Note 16 Inventories

Accounting policyInventories (except for inventories held for trading) are

valued at the lower of their cost and net realisable value.

Net realisable value is the estimated sales price in operating

activities, less estimated costs for completion and to

bring about a sale. The cost of inventories is calculated,

depending on the type of inventory, either through

application of the first-in, first-out (FIFO) method or through

the application of a method based on average prices. Both

methods include costs that arose on acquisition of the

inventory assets.

Inventories held for trading are valued at fair value less

costs to sell. For CO2 emission allowances that are held for

trading, fair value is based on quoted prices (Level 1). For

other commodities fair value measurement is derived from

an observable market price (API#2 for coal), which means

a categorisation into Level 2 of the fair value hierarchy. See

Note 3 to the consolidated accounts, Accounting policies.


2019 2018

Inventories held for own use

Materials and spare parts 27 26

Other 3 2

Total 30 28

Inventories held for trading

Fossil fuel 42 94

CO2 emission allowances/certificates 4 3

Biomass 9 5

Total 55 102

Total inventories 85 130


Note 18 Advance payments paid

2019 2018

Margin calls paid, energy trading 1 8

Total 1 8

A margin call paid is a marginal security (collateral) that

Vattenfall NV pays its counterparty as the holder of a

derivative position to cover the counterpart’s credit risk,

either bilaterally via OTC or through an exchange. In

Vattenfall NV’s business activities, margin calls occur in

energy trading and in the financing operations.

Note 17 Trade receivables and other receivables

Accounting policyTrade receivables and other receivables are initially

measured at fair value and subsequently at amortised

cost. For trade receivables calculation of the loss reserve

is based on expected credit losses for the remaining

term. A collective method is used where the receivables

are grouped together per business line based on e.g.,

the number of days past due including any past-due

receivables, and a credit loss percentage is calculated for

the respective intervals, where in the model Vattenfall NV

has based its calculations on experience from historic loss

levels for receivables with similar credit risk characteristics

while taking into account forward-looking macroeconomic

conditions that may affect expected cash flows. For

individual significant receivables, an individual assessment

may be made. The allowance for expected credit losses

2019 2018

Receivables, gross

Impaired receivables

Receivables, net

Receivables, gross

Impaired receivables

Receivables, net

Accounts receivable - trade

Not due 277 1 276 288 1 287

Past due 1-30 days 41 1 40 33 1 32

Past due 31-90 days 15 1 14 13 1 12

Past due >90 days 44 17 27 34 16 18

Total 377 20 357 368 19 349

of trade receivables is reported in operating expenses.

Vattenfall NV evaluates the concentration of risk with

respect to trade receivables as low, as its customers are

located in all Dutch regions and, in case of businesses,

operate in several industries in largely independent markets.


Accounts receivable - trade 357 349

Receivables from related companies 873 1,948

Other receivables 15 21

Total 1,245 2,318

Note that that due to the homogeneous nature of B2C

balances, debit as well as credit balances are summed into

one AR position.

Age analysis

The collection period is normally between 10 and 30 days.

Note 19 Prepaid expenses and accrued income

2019 2018

Prepaid expenses and accrued

income, electricity 181 100

Prepaid expenses, other 6 5

Accrued income, other 5 2

Total 192 107

Note 20 Cash and cash equivalents

2019 2018

Cash and bank balances 83 45

Total 83 45


Note 21 Interest-bearing liabilities

Note 22 Pension

Accounting policyVattenfall NV’s pension obligations are defined contribution

plans.

Defined contribution pension plans

Defined contribution pension plans are post-employment

benefit plans according to which fixed fees are paid to

a separate legal entity. There is no legal or constructive

obligation to pay additional fees if the legal entity does not

have sufficient assets to pay all benefits to the employees.

Fees for defined contribution pension plans are reported

as an expense in the income statement in the period they

apply to.

Dutch pension plans

Vattenfall NV has various pension and similar plans for its

current and former employees. The majority of the pension

obligations has been transferred to the ABP pension fund

and the ‘Metaal en Techniek’ pension fund. In addition to

these two main pension plans, Vattenfall NV has a small

number of defined benefit plans that are in aggregate

not material. The ABP and ‘Metaal en Techniek’ plans are

classified and reported as defined contribution plans. The

coverage ratio of the ABP pension fund amounts to 97.8%

(2018: 103.8%) and the pension premium for 2019 amounts

to 24.9% (2018: 21.5%). The coverage ratio of the ‘Metaal en

Techniek’ pension fund amounts to 98.8% (2018: 102.3%)

and the pension premium for 2019 amounts to 28.0%

(2018: 28.5%).

Note 23 Provisions

Accounting policyA provision is reported on the balance sheet when the

Company has a legal or constructive obligation as a result

of a past event and it is probable that an outflow of financial

resources will be required to regulate the obligation and

a reliable estimate of the amount can be made. Where

the effect of the time when payment is made is material,

provisions are estimated by discounting the anticipated

future cash flow at an interest rate before tax that reflects

market estimates of time value of money. The discount rate

does not reflect such risks that are taken into consideration

in the estimated future cash flow.

Changes in discounted provisions for dismantling,

restoration or similar measures, which at the time of

acquisition have also been reported as Property, Plant

and Equipment, are reported as follows: In cases where

the change is due to a change in the estimated outflow

of resources or a change in the discount rate, the cost of

Property, Plant and Equipment is changed in an amount

corresponding to the provision. The periodic change of the

present value is recognised as a financial expense.

Provisions are also reported for onerous contracts, that is,

where unavoidable costs of meeting the obligations under

the contract exceed the economic benefits expected to be

received from the contract.

Important estimations and assessmentsOther provisions

For other types of provisions, such as provisions for

future expenses for gas and wind operations and other

environmental measures/undertakings, and for personnel-

related provisions for non-pension purposes, or other

provisions, the following discount rate is used, when

discount effect is material: 0.25 % (0.75 %).

Provisions for future expenses for heat and wind

operations and other environmental measures/

undertakings

Provisions are made in the Netherlands for the dismantling

and removal of assets and restoration of sites where

the Company conducts gas operations. Provisions are

also made for restoration of sites where the Vattenfall NV

conducts wind operations and for environmental measures/

undertakings within other activities carried out by the

Company.

Non-current portion maturity 1-5 years

Non-current portion maturity >5 years

Total non-current portion Current portion Total

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Other liabilities 58 13 22 14 80 27 31 2 111 29

Total interest-bearing liabilities 58 13 22 14 80 27 31 2 111 29

Reported values for interest-bearing liabilities are specified as follows:

Leasing liabilities are part of the other liabilities. The non-

current portion amounts to EUR 54 million and the current

portion amounts to EUR 29 million. Further reference is

made to note 11 Leasing to the consolidated accounts.


Personnel-related provisions for non-pension purposes

Provisions are made for future costs pertaining to:

• Long-term time accounts. This covers the obligation

to continue paying all or part of an employee’s salary

during the first two years of sick leave.

• Jubilee payments. This covers the jubilee benefits paid

to employees for every 10 years of service and after

retiring upon reaching the retirement age

• Severance payments related to restructuring measures.

This covers payments and/or supplements to benefits

granted to employees whose employment contract

has been terminated. These benefits and supplements

are based on the Social Plan operated by Vattenfall NV

and individual arrangements (including Voluntary Leave

Package).

• Other costs for giving notice to personnel.

Other provisions

Other provisions include, among others, provisions

for onerous contracts, restructuring and guarantee

commitments.


Non-current portion Current portion Total

2019 2018 2019 2018 2019 2018

Provisions for future expenses of gas and wind operations

and other environmental measures/undertakings 41 30 1 1 42 31

Personnel-related provisions for non-pension purposes 24 24 12 16 36 40

Other provisions 19 21 3 3 22 24

Total 84 75 16 20 100 95

Movement schedule provisionsProvisions

for gas, wind and other

environmental measures

Personnel-related provisions for non-pension purposes Other provisions

Balance brought forward 31 40 24

Provisions for the period — 9 4

Revaluations 11 — —

Provisions used — -7 -1

Provisions reversed — -6 -5

Balance carried forward 42 36 22

Future expenses of non-current provisions

With the current assumptions, provisions are

expected to result in outgoing payments as shown below:

Provision for gas and wind

operations

Personnel- related

provisionOther

provisions Total

2-5 years 5 16 6 27

6-10 years 4 8 13 25

11-20 years 8 — — 8

Beyond 20 years 24 — — 24

Total 41 24 19 84

Note 24 Trade payables and other liabilities2019 2018

Accounts payable-trade 212 225

Liabilities to related companies 580 1.002

Other liabilities 444 399

Total 1,236 1,626


Note 25 Advance payments received

A margin call received is marginal security (collateral) that

Vattenfall NV’s counterparty pays to Vattenfall NV as the

holder of a derivative position to cover Vattenfall NV’s credit

risk, either bilaterally via OTC or through an exchange. In

Vattenfall NV’s business activities, margin calls occur in

energy trading and in the treasury operations.

Margin calls received within energy trading are recognised

on the balance sheet as Advance payments received and

are thereby recognised in the statement of cash flows as

cash flows from changes in operating liabilities while margin

calls received within financing activities are recognised

on the balance sheet as Current interest-bearing liabilities

(Note 21 to the consolidated accounts, Interest-bearing

liabilities) and are thereby recognised in the statement of

cash flows as cash flows from financing activities.

Note 26 Accrued expenses and deferred income

2019 2018

Accrued personnel-related costs 55 43

Accrued expenses, CO2 emission allowances 174 102

Other accrued expenses 11 10

Deferred income and accrued

expenses, electricity 179 143

Other deferred income 81 7

Total 500 305

Note 27 Financial instruments by measurement category, offsetting of financial assets and liabilities, and financial instruments’ effects on income

Accounting policyClassification and measurement

Financial assets

Financial assets are classified in various categories based

in part on the objective (the business model) of holding

the financial asset, and in part on the financial instrument’s

contractual cash flows, in the event they consist only

of principal amounts and interest. The classification is

determined at the original point of acquisition. Settlement

day accounting is applied for spot purchases and spot

sales of financial assets.


2019 2018

Margin calls received, energy trading — 4

Other advance payments 6 —

Total 6 4

Amortised cost

Financial assets (debt instruments) are classified in this

category if they are held in a business model whose

objective is to hold financial assets in order to collect their

contractual cash flows, and if the contractual terms of the

financial asset give rise on specified dates to cash flows

that are solely payments of principal and interest on the

principal amount outstanding. These instruments are

measured at amortised cost, where the reported gross

value is adjusted for expected credit losses. For Vattenfall

NV this category includes Other non-current receivables,

Trade receivables and other receivables, Advance

payments paid, and Cash and bank balances.

Fair value through profit or loss

This category includes all of Vattenfall NV’s financial assets

(debt instruments) that are not measured at amortised

cost. This includes assets held for trading, which entails

that the objective is that they will be sold in the near term,

and assets that Vattenfall NV is monitoring and measuring

based on fair value. Debt instruments are also classified in

this category if the contractual terms do not consist solely

of payments of principal and interest.

Derivative assets are measured at fair value through profit

or loss. The assets in this category are remeasured on a

regular basis to fair value with changes in value reported in

profit or loss.

Financial liabilities

Financial liabilities at fair value through profit or loss

Derivative liabilities are always classified in this category.

These financial liabilities are measured at fair value with

changes in value recognised in profit or loss.

Other financial liabilities

In this category, interest-bearing and noninterest-bearing

financial liabilities that are not held for trading purposes

are reported. Other financial liabilities are measured at

amortised cost. Trade liabilities have a short anticipated

term and are therefore valued at a nominal amount without

discounting.

Impairment

Impairment of financial assets is based on models for

expected credit losses. For trade receivables that do not

include a significant financing component, a simplified

method is used, where calculation of the loss reserve

is based on expected credit losses for the remaining

term. A collective method is used where the receivables

are grouped together per business line based on e.g.,

the number of days past due including any past-due

receivables, and a credit loss percentage is calculated for

the respective intervals, where in the model Vattenfall NV

has based its calculations on experience from historic loss


2019 2018

Carrying amount

Fair value

Carrying amount

Fair value

Financial assets at amortised cost

Other non-current receivables 47 51 41 44

Financial liabilities at amortised cost

Other non-current interest-bearing liabilities 80 88 27 36

levels for receivables with similar credit risk characteristics

while taking into account forward-looking macro-economic

conditions that may affect expected cash flows. For

individual significant receivables, an individual assessment

may be made. The allowance for expected credit losses

of trade receivables is reported in operating expenses.

Vattenfall NV evaluates the concentration of risk with

respect to trade receivables as low, as its customers are

located in all Dutch regions and, in case of businesses,

operate in several industries in largely independent markets.

For other financial assets where the policies for impairment

are applied, a loss reserve is reported that corresponds to

12 months’ expected credit losses at initial recognition. If the

credit risk increases significantly since initial recognition,

a reserve corresponding to expected credit losses during

the entire term is reported. Vattenfall NV presumes that the

credit risk has not increased significantly if the instrument

has a low credit risk on the balance sheet date, such as

instruments with an investment grade rating. The credit

risk is considered to have increased significantly if the

counterparty’s rating has been lowered to a lower rating

than investment grade or, alternatively, if the counterparty

already had a lower credit rating than investment grade at

initial recognition and this rating was significantly lowered

further. Expected credit losses are calculated by assessing

the probability of default, the loss given default and the

exposure at default.

Financial informationRisks arising from financial instruments are described in

Note 28 Financial Risks of the consolidated accounts.

Financial instruments by measurement category

Presented below are assets and liabilities where the

carrying amount differs from the fair value.

Offsetting financial assets and financial liabilities

Presented below are financial assets and liabilities that are

subject to enforceable master netting arrangements and

similar agreements.

Assets 31 December 2019

Related amounts not set off on the balance sheet

Gross amounts of recognised

financial assets


financial liabilities set off on the balance

sheet

Net amounts of financial assets

presented on the balance

sheet

Financial liabilities, not

intended to be settled net1

Cash collateral received

Net amount

Derivatives, commodity contracts 578 564 14 — — 14

Total 578 564 14 — — 14

Derivatives, not subject to offsetting 188 — 188 — — 188

Total derivative assets 202 202

Assets 31 December 2018



financial assets


financial liabilities set off on the balance

sheet

Net amounts of financial assets

presented on the balance

sheet

Financial liabilities, not


Cash collateral received

Net amount

Derivatives, commodity contracts 2,333 1,967 366 — 5 361

Total 2,333 1,967 366 — 5 361


Total derivative assets 451 446

Net amounts of financial assets presented on the balance

sheet with related parties amount to EUR 5 million (291)

as of 31 December 2019.


Liabilities 31 December 2019



financial liabilities


financial assets set off

on the balance sheet

Net amounts of financial

liabilities presented on

the balance sheet

Financial assets, not


Cash collateral pledged

Net amount

Derivatives, commodity contracts 747 564 183 — — 183

Total 747 564 183 — — 183


Total derivative liabilities 244 244

Liabilities 31 December 2018



financial liabilities


financial assets set off

on the balance sheet

Net amounts of financial

liabilities presented on

the balance sheet

Financial assets, not


Cash collateral pledged

Net amount

Derivatives, commodity contracts 1,989 1,967 22 — 8 14

Total 1,989 1,967 22 — 8 14


Total derivative liabilities 45 37

Net amounts of financial liabilities presented on the balance

sheet with related parties amount to EUR 179 million (8) as

of 31 December 2019.

1) These items cannot be settled net as each transaction has a unique due date and they were not entered into with the purpose to be settled net. Settlement can

be entailed only in case of default and only and when it is intented to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Financial assets and liabilities that are measured at fair value on the balance sheet at 31 December 2019

Level 1 Level 2 Level 3 Total

Assets

Derivative assets — 156 46 202

Total assets — 156 46 202

Liabilities

Derivative liabilities — 244 — 244

Total liabilities — 244 — 244

Financial assets and liabilities that are measured at fair value on the balance sheet at 31 December 2018

Level 1 Level 2 Level 3 Total

Assets

Derivative assets — 451 — 451

Total assets — 451 — 451

Liabilities

Derivative liabilities — 40 5 45

Total liabilities — 40 5 45


Sensitivity analysis for Level 3 contracts

For the determination of fair value of financial instruments,

Vattenfall NV strives to use valuation techniques that

maximise the use of observable market data where it is

available and rely as little as possible on entity-specific

estimates.

Entity-specific estimates are based on internal valuation

models that are subject to a defined process of validation,

approval and monitoring. In the first step the model is

designed by the business. The valuation model and

calibration of the valuation model is then independently

reviewed and approved by Vattenfall NV’s risk organisation.

If deemed necessary, adjustments are required and

implemented. Afterwards, Vattenfall NV’s risk organisation

continuously monitors whether the application of the

method is still appropriate. This is made by usage of several

back-testing tools. In order to reduce valuation risks, the

application of the model can be restricted to a limited scope.

Vattenfall NV's Level 3 contracts consist of CDM and virtual

gas storage contracts. The net value as per 31 December

2019 has been calculated at EUR 46.1 million (-4.6) and is

most sensitive to the optionality volatility. A change in the

value of the daily volatility of +/-5% would affect the total

value by approximately +/- EUR 2.5 million (+/-3.8).

Derivative assets

Derivative liabilities




2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Commodity and commodity-relatedcontracts 12 98 — — 12 98 190 353 202 451

Total 12 98 — — 12 98 190 353 202 451




2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Commodity and commodity-related contracts 34 6 — — 34 6 210 39 244 45

Total 34 6 — — 34 6 210 39 244 45

Note 28 Financial risks

The following risks can be identified with respect to

financial instruments: market risk, credit risk and liquidity

risk. These risks are managed on a Vattenfall AB level.

Vattenfall AB’s risk management to the extent to which it is

relevant for Vattenfall NV are summarised below.

Market risk – commodities including electricityMarket risk for electricity and commodities refers to the risk

of Vattenfall failing to achieve its financial targets as a result

of an adverse change in commodity prices. Vattenfall AB’s

price hedging strategy is focused on the Nordic generation

assets. Vattenfall NV does not apply hedge accounting for

new transactions in its consolidated account, since 2017.

Risk management activities

Through our asset ownership and sales activities we are

exposed to electricity, fuel, and CO2 emission allowance

prices, which are affected by several fundamental factors,

such as the global macroeconomic situation, local supply,

demand, and political decisions. We are active in the

wholesale trading market to hedge our electricity position

and fuel requirements through physical and financial

forward contracts and long-term customer contracts.

These contracts pertain to time horizons in which there

is no possibility to hedge prices in the liquid part of the

futures market, and stretch as far as 2026. Most volumes

are hedged at the beginning of this time horizon, with falling

volumes towards the end. The Vattenfall Risk Committee

(VRC) decides how much generation is to be hedged

within the mandates issued by the Board of Directors. To

measure electricity price risk, we use methods such as

Value at Risk (VaR) and Gross Margin at Risk along with

various stress tests. With the current portfolio structure,

the dominant risk exposure is now coupled to Nordic

nuclear and hydro power baseload generation. In addition,

Vattenfall’s continuing operations generate a higher share

of regulated revenue from distribution, heat and tendered

wind power, which reduces the total risk exposure on the

Continent (Germany, the Netherlands as well as the UK).

Vattenfall continues to have some price exposure between


electricity and used fuel/emissions on the Continent. Such

an exposure has a lower risk profile than the outright power

exposure in the Nordic countries. The market price risk of

Vattenfall’s production assets and hedges for electricity, fuel

prices and emissions as well as the ancillary trading market

price risks are monitored daily.

VaR levels

VaR calculation quantifies potential changes in the

value of commodity positions as a result of market price

movements. The inputs to the VaR calculation are positions

(open volumes), current market prices and the variability of

prices (volatilities and correlations), all of which are updated

daily. The risk limits are designed to prevent maximum loss

to exceed SEK 2.5 billion (approximately EUR 239 million),

which can be compared to a VaR of EUR 25 million (26),

with a 99% confidence level and a 1-day holding period.

Thus, the VaR measures the marked-to-market movement

arising from a 1-day change in market prices, under normal

market conditions, which should only be exceeded 1% of

the time. The VaR levels for Vattenfall NV amount to EUR 1.4

million (1.6).

Ancillary trading

In addition to commodity market risk resulting from our

assets and sales activities, Vattenfall AB’s Board of Directors

has given the CEO a risk mandate to allow discretionary

risk-taking and trading in the wholesale market. Most of

our risk exposure in the ancillary trading portfolio is based

on market prices (mark-to-market). In cases where market

prices cannot be observed, modelled prices are used

(mark-to-model). Mark-to-model positions arise mainly

in asset- and sales-related portfolios, see Note 27 to the

consolidated accounts, Financial instruments. Management

of such valuation models is strictly regulated, and approval

is required from the risk organisation before they may be

used.

Volume riskVolume risk pertains to the risk for deviations between

anticipated and actual delivered volume.


District heating volumes are managed by improving and

developing forecasts for heat consumption. There is a

correlation between electricity prices and generated

electricity volume. Volume risk also arises in the sales

activities as deviations in the anticipated volumes against

actual volumes delivered to customers. Here, too, improved

monitoring and forecasting capabilities are the most

efficient risk management instruments.

Liquidity riskLiquidity risk refers to the risk of Vattenfall not being able

to finance its capital needs and arises if asset values

at maturity do not match those of liabilities and other

derivatives.


Access to capital and flexible financing solutions are

ensured through several types of debt issuance programs

and credit facilities on the level of Vattenfall AB. Vattenfall

AB has a defined target for its short-term accessibility to

capital. The goal is that funds corresponding to no less than

10% of the consolidated net sales, or the equivalent of 90

days’ stressed liquidity needs of the business (whichever

is higher) shall be available. As per 31 December 2019,

available liquid assets and/or committed credit facilities

amounted to 30% (28%) of consolidated net sales. Vattenfall

AB is committed to maintaining financial stability, which

is reflected in the company’s long-term targets for capital

structure. On 8 November 2018 Standard & Poor’s affirmed

Vattenfall AB’s long-term BBB+ rating and short-term A-2

rating. On 4 June 2019 Moody’s affirmed Vattenfall AB’s long-

term A3 rating and Baa2 rating for hybrid bonds. The outlook

for Vattenfall AB’s rating was revised from negative to stable

by Standard & Poor’s in 2017, down to negative by Moody's in

2019. Vattenfall has no imminent refinancing need and may

possibly approach the market in the second half of 2020.

Contractual cash flows

Vattenfall NV is financed via internal loans and credit

facilities. To provide insight into the liquidity risk, the

following table shows the contractual terms of the

financial obligations (translated at the reporting date rate),

including interest payments. The contractual cash flows of

non-current assets as well as current assets combined with

the internal loans and credit facilities available at Vattenfall

AB cover the current need for liquidity as included in the

table. The total facilities available at Vattenfall AB amount to

EUR 500 million, of which none was utilised.




2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Interest-bearing liabilities 57 13 27 17 84 30 32 3 116 33

Derivatives 597 513 — — 597 513 870 775 1,467 1,288

Trade payables and other financial liabilities — — — — — — 1,236 1,626 1,236 1,626

Total 654 526 27 17 681 543 2,138 2,404 2,819 2,947


Interest rate riskInterest rate risk refers to the negative impact of changed

interest rates on Vattenfall’s income statement and cash flow.


We quantify interest rate risk in our debt portfolio in terms of

duration, which describes the average term of fixed interest.

The norm duration is based on Vattenfall AB’s current

financing need and desired interest rate sensitivity in net

interest income/expense. Duration is to have a norm of five

years with a permissible variation of +2/–1 year. The duration

of Vattenfall AB’s debt portfolio at year-end was 4.67 years

(4.31) including Hybrid Capital.

Sensitivity analysis in relation to cash flows for variable

interest assets and liabilities

Vattenfall NV is exposed to interest rate risk on its interest-

bearing liabilities, see Note 21. A change of 100 basis

points in the interest rates as at 31 December 2019 would,

assuming all other circumstances remain unchanged, have a

pre-tax effect on Vattenfall NV’s equity and financial income

and expenses of EUR 0 million (0) on an annual basis.

Currency riskCurrency risk refers to the negative impact of changed

exchange rates on Vattenfall’s income statement and balance

sheet.


Vattenfall AB is exposed to currency risk through exchange

rate movements attributable to future cash flows (transaction

exposure). Currency exposure in borrowing is limited by

using currency exchange rate swaps. We strive for an

even maturity structure for derivatives. Derivative assets

and derivative liabilities are reported in Note 27 to the

consolidated accounts, Derivative assets and derivative

liabilities. We have limited transaction exposure, since most

generation, distribution and sales of electricity take place

in the respective local markets. Sensitivity to currency

movements is therefore relatively low. All transaction exposure

that exceeds a nominal value equivalent to SEK 10 million

is to be hedged immediately when it arises. The target for

hedging translation exposure is to, over time, match the

currency composition in the debt portfolio with the currency

composition of Vattenfall AB’s funds from operations (FFO).

Sensitivity analysis in relation to currency risk

Vattenfall NV’s exposure to significant currency risks based

on nominal values amount to EUR 20 million (32). This

exposure is reduced by derivatives concluded to hedge the

currency risk for an amount of EUR 17 million (38). The pre-

tax effect that a possible increase or decrease in the value of

foreign currencies relative to the euro would have, assuming

all other circumstances remain unchanged, on Vattenfall

NV’s financial income and expenses and equity, taking into

account the derivatives, amount to EUR 0.3 million (0.7).

Credit riskCredit risk can arise if a counterparty cannot or fails to

meet its obligations and exists in all parts of Vattenfall’s

operations.


We have a strict framework for governing and reporting

credit risks to ensure that risks are monitored, measured

and minimised so that the total credit exposure is kept

within Vattenfall AB’s risk appetite. The company’s credit

risk management involves the analysis of its counterparties,

reporting of credit risk exposures, contract negotiations

and proposals for risk mitigation measures (e.g., obtaining

collateral).

Note 29 Specifications of equity

Authorised, issued and paid-up share capitalThe authorised share capital of Vattenfall NV amounts to

EUR 1,500,000,000 consisting of 300,000,000 shares,

with a nominal value of EUR 5 per share. The total number

of issued and paid-up shares amounts to 136,794,964

shares totaling a paid-up capital of EUR 683,974,820. All

shares are held by Vattenfall AB.

Share premiumShare premium consists of the additional paid-up or

contributed value to Vattenfall NV.

Retained earnings including result for the yearRetained earnings including result for the year include

results in Vattenfall NV and its subsidiaries, associated

companies and joint ventures.

Dividend policyVattenfall NV’s dividend policy stipulates the following:

• The maximum dividend distribution shall be the net

profit, adjusted for significant non-cash fair value

movements on financial instruments;

• As a result of the dividend distribution the debt/equity

ratio will not exceed 60/40;

• The dividend distribution can only be done to the extent

that adequate liquidity lines are available to Vattenfall

NV and a sufficiently sustainable cash position is

maintained over the next 12 months as proven by the

long-term cash forecast of Vattenfall NV.


Note 30 Contingent liabilities

As per 31 December 2019 contingent liabilities amounted

to EUR 422 million (274). The contingent liabilities mainly

consist of capital expenditure commitments regarding

property, plant and equipment and intangible assets. The

outstanding capital expenditure commitments, which relate

mainly to construction in progress, and other purchasing

commitments.

Sales and purchase commitmentsVattenfall NV has concluded a number of long-term

purchase contracts with terms varying from 2019 to 2034.

In addition, Vattenfall NV has concluded long-term sales

contracts on varying terms and conditions. Vattenfall NV

enters into energy commodity contracts for the sale and

purchase of electricity, oil, gas, coal, biomass and emission

allowances. The energy commodity contracts that are held

for trading purposes and the energy commodity contracts

that are designated as hedging instruments are recognised

on the balance sheet at fair value. These contracts are

not generally settled by means of physical delivery but by

concluding opposite transactions in which only the net

cash flows are settled.

Please refer to Note 28 Financial risks for the liquidity

overview, which shows the contractual terms of all financial

obligations recognised.

Contingent liabilitiesAt the reporting date, Vattenfall NV (including its

subsidiaries, associated companies and joint ventures)

was involved in a number of legal proceedings and

investigations by tax and other authorities. Provisions have

been made as far as deemed necessary in accordance

with management’s estimate and the accounting principles.

Vattenfall NV believes that the ultimate resolution of these

claims and proceedings will not, in the aggregate, have a

material adverse effect on the Company’s financial position,

consolidated income or cash flows.

At 31 December 2019, the Company has issued bank

guarantees and letters of credits amounting to EUR 1 million

(1). Vattenfall NV has provided several parent guarantees

for its subsidiaries, joint ventures or associated companies,

part of which are uncapped. At 31 December 2019, these

parent guarantees amounted to EUR 6 million (3).

Vattenfall NV has issued declarations of joint and several

liability pursuant to article 403, Part 9, Book 2 of the Dutch

Civil code for a number of its subsidiaries. The significant

group companies for which such a declaration has been

issued are included in the list of subsidiaries, associated

companies and joint ventures included in Note 14 Shares

and participations of the consolidated accounts. As

partners in a number of general partnerships, subsidiaries

of Vattenfall NV are liable for the obligations of these

partnerships. The exposure under these obligations is not

considered to be significant.

Vattenfall NV and the majority of its subsidiaries form

a fiscal unity for both corporate income tax and VAT

purposes. Consequently, every legal entity forming part

of the fiscal unity is jointly and severally liable for the tax

liabilities of the legal entities forming part of the fiscal unity.

LicencesVattenfall NV has a licence for the supply of electricity, gas

and heat and holds licences for constructing certain power

and heat facilities.

Note 31 Number of employees and personnel costs

Number of employees during the year, full-time equivalents:

2019 2018

Men Women Total Men Women Total

Netherlands 2,655 903 3,558 2,577 822 3,399

Germany 17 1 18 18 1 19

Total 2,672 904 3,576 2,595 823 3,418

Average number of employees at 31 December, full-time equivalents:

2019 2018

Men Women Total Men Women Total

Netherlands 2,669 905 3,574 2,596 824 3,420

Germany 18 1 19 18 1 19

Total 2,687 906 3,593 2,614 825 3,439


Benefits for Management and Supervisory Board members of Vattenfall NV

2019 2018

Amounts in EUR thousands

Directors' fees and

base salary including

vacation pay

Other remuneration and

benefits

Pension and severance

costs

Directors' fees and

base salary including

vacation pay

Other remuneration and

benefits

Pension and severance

costs

Management Board 1,295 146 702 1,538 — 33

Supervisory Board 17 — — 17 — —

Total 1,312 146 702 1,555 — 33

Personnel costs:

2019 2018

Salaries and other remuneration 228 220

Social security costs 37 32

Pension costs 31 29

Total 296 281

Note 32 Related party disclosures

As of 1 July 2015, 100% of Vattenfall NV’s shares are owned

by Vattenfall AB. Vattenfall AB has a casting vote in the

Supervisory Board and qualifies as a related party. Vattenfall

NV also conducts transactions with subsidiaries of

Vattenfall AB. Furthermore, Vattenfall NV and its subsidiaries

have interests in various associated companies and joint

ventures over which it exercises significant influence, but no

control or only joint control of the operations and financial

policy. Transactions with the parties classified as related

Various goods and services are bought or provided on

normal commercial terms and conditions within Vattenfall

AB. A cost-sharing program is in place, which entails that

certain costs within the group are recharged to the users

within Vattenfall AB based on actual usage. Vattenfall NV, in

the ordinary course of business, trades commodities with

and via Vattenfall Energy Trading Germany (VET Germany).

In the ordinary course of business, Vattenfall NV has

outstanding payables and receivables with Vattenfall AB

and its subsidiaries (refer to Note 17, Note 21 and Note 24)

as well as with its associated companies and joint ventures

(Note 15). Vattenfall NV has also granted a limited number

of loans to related parties. Where relevant, this has been

disclosed in these consolidated accounts.

The members of the management board and supervisory

board of Vattenfall NV have been identified as individuals

who qualify as related parties. The employee benefits

related to these individuals have been disclosed in Note 31.

parties are conducted at market conditions and prices that

are not more favourable than the conditions and prices

offered to independent third parties.

Disclosures of transactions with key persons in executive

positions in the company are shown in Note 42 to the

Consolidated accounts, Number of employees and

personnel costs.

The following transactions have taken place with related

parties with regard to sales and purchases of goods and

services, including leases.

2019 2018

Sales of goods and services to Vattenfall AB and its subsidiaries 38 43

Sales of goods and services to associated companies and joint ventures 32 32

Costs charged by Vattenfall AB and its subsidiaries -49 -52

Costs charged by associated companies and joint ventures -3 -3


Note 33 Events after the balance sheet date

The world has drastically changed due to the Covid-19

pandemic, affecting the whole world, with a lock-down

in Europe and more pressure on the industry. We are

proud of all our employees who are working hard every

day to ensure the continuation of stable delivery of

electricty, gas and heat to our customers. They show a

fighting spirit to keep making this possible despite the

challenging time. We have taken measures to reduce the

risks of the virus for our employees. Who can work from

home has to stay home and we support them in various

ways. We are following all instruction from the Government

and we implemented protocols and measures to mitigate

the risk for our employees that can not work from home

as they work in vital processes or at the sites of our clients.

Up to the publication of this report we have not seen any

major disruptions in our operations.

The virus has impact on the whole economy, affecting both

the energy demand from our business consumers and the

energy prices. This will have impact on our performance

in 2020. We are therefore closely montoring our liquidity

situation and taking measures to secure our operations.

In light of the current COVID-19 situation and a careful

evaluation of our risk-reward balance against the remainder

of our strong pipeline and the rest of our ongoing projects,

we have decided that we will not participate in the tender

for Hollandse Kust Noord and not pay any dividend to our

shareholder during the course of 2020 relating to financial

year 2019.


Company accounts


Amounts in EUR million, before appropriation of result Note 31 December 2019 31 December 2018

Assets

Non-current assets

Property, plant and equipment 2 46 29

Investments in subsidiaries 3 3,060 3,151

Deferred tax assets 5 5 2

Receivables from group companies 4 62 139

Other non-current receivables 5 45 38

Total non-current assets 3,218 3,359

Current assets

Trade receivable and other receivables 4 12

Receivables from group companies 2,688 2,806

Cash and cash equivalents 6 51 13

Total current assets 2,743 2,831


Equity and Liabilities

Equity

Share capital 684 684

Share premium 2,211 2,797

Legal reserves 230 436

Other reserves - 879 - 1,132

Unappropriated result for the year - 214 211

Total equity attributable to Vattenfall NV shareholders 7 2,032 2,996

Provisions 8 37 40

Non-current liabilities

Interest-bearing liabilities 9 18 -

Non-current liabilities 18 -

Current liabilities

Trade payables and other liabilities 150 155

Interest bearing liabilities 9 8 -

Payables to group companies 3,716 2,999

Total current liabilities 3,874 3,154


Company balance sheet

Amounts in EUR million, 1 January - 31 December Note 2019 2018

Result after taxation from subsidiaries - 215 209

Other income less expenses after taxation 11 1 2

Result after taxation - 214 211

Company income statement


Notes to the company accounts

1 Accounting policies 53

2 Property, plant and equipment 54

3 Investments in subsidiaries 55

4 Non-current receivables from group companies 55

5 Deferred tax assets and other non-current receivables 55

6 Cash and cash equivalents 56

7 Equity 56

8 Provisions 56

9 Interest-bearing liabilities 56

10 Contingent liabilities 56

11 Other income less expenses after taxation 57

12 Number of employees 57

13 Events after the balance sheet date 57

14 Proposed result appropriation 57



Note 1 Accounting policies

The company accounts have been prepared in accordance

with the provisions of Part 9, Book 2 of the Dutch Civil Code.

In the company accounts, Vattenfall NV uses the option

provided for in Part 9, Book 2 of the Dutch Civil Code to

prepare the company accounts in accordance with the

IFRS accounting policies that are used in the preparation

of the consolidated accounts. The company income

statement is presented in abridged form, as allowed by

section 402, Part 9, Book 2 of the Dutch Civil Code. In

addition to the accounting policies for the consolidated

accounts, specific accounting policies for the company

accounts are presented below.

Vattenfall NV applies the exemption provided for by section

382, Part 9, book 2 of the Dutch Civil Code, that the audit

fee does not need to be disclosed. The financial figures

of Vattenfall NV are consolidated in the annual report of

Vattenfall. In the Vattenfall annual report the total audit fee

of Vattenfall, including Vattenfall NV, is disclosed.

Investments in subsidiariesInvestments in subsidiaries are valued at net asset value,

which is determined on the basis of IFRS accounting

policies as used in the consolidated accounts.

Receivables from group companies Loans and receivables from subsidiaries are stated at

amortised cost, less impairment. The company makes use

of the option to eliminate intercompany expected credit

losses against the investments in subsidiaries.



Note 2 Property, plant and equipment


2019

Land and buildings

Equipment, tools and

fixtures and fittings

Construction in progress Total

Cost

Cost brought forward 16 222 3 241

Adoptation of new accounting standard (IFRS 16) 27 5 - 32

Investments - 1 4 5

Transfer from construction in progress 2 3 - 5 -

Accumulated cost carried forward 45 231 2 278


Depreciation brought forward - 8 - 204 - - 212

Depreciation for the year - 10 - 10 - - 20

Accumulated depreciation according to plan carried forward - 18 - 214 - - 232

Residual value according to plan carried forward 27 17 2 46

2018

Land and buildings

Equipment, tools and

fixtures and fittings

Construction in progress Total

Cost

Cost brought forward 16 207 11 234

Investments - 1 6 7

Transfer from construction in progress - 14 - 14 -

Accumulated cost carried forward 16 222 3 241


Depreciation brought forward - 6 - 196 - - 202

Depreciation for the year - 2 - 8 - - 10

Accumulated depreciation according to plan carried forward - 8 - 204 - - 212

Residual value according to plan carried forward 8 18 3 29

For further disclosure, reference is made to Note 13 to the consolidated accounts, Property, plant and equipment.


Note 3 Investments in subsidiaries

2019 2018

Balance brought forward 3,151 2,920

New share issues and shareholders’

contributions

116 -

Share in result - 207 209

Share in other comprehensive

income

- 22

Balance carried forward 3,060 3,151

A list of directly and indirectly held participations in

subsidiaries is included in Note 15 to the consolidated

accounts.

Note 4 Non-current receivables from group companies

2019 2018

Balance brought forward 139 149

Loans repaid - 77 - 10

Balance carried forward 62 139

The effective interest rate on the non-current receivables

from group companies was 0.2% (2018: 0.2%).


Note 5 Deferred tax assets and other non-current receivables

Deferred tax assets

Other non-current

receivables Total


Loans granted - 17 17

Loans and interest repaid - - 10 - 10

Temporary differences charged to profit or loss

3 - 3


2018

Deferred tax assets

Other non-current

receivables Total


Loans granted - - -

Loans repaid - - 5 - 5

Temporary differences charged to profit or loss

- 2 - - 2


Other non-current receivables consist of loans and

receivables (including incremental costs) with related

parties.


Note 6 Cash and cash equivalents

There were no restricted cash and cash equivalents at the

end of 2019 and 2018.

Note 7 Equity

The Consolidated statement of changes in equity

and disclosures to that statement are included in the

Consolidated accounts. In addition to the Consolidated

statement of changes in equity, a non-distributable legal

reserve, in the form of a revaluation reserve, is recognised

for unrealised fair value gains on financial instruments that

are recognised in income, and for which no frequent market

quotations are available (Level 2 and Level 3 financial

instruments). With regard to Vattenfall NV, this relates to

energy commodity contracts for oil, gas, coal, electricity,

biomass and emission allowances that are not traded

through recognised exchanges (e.g. Amsterdam Power

Exchange, Endex), known as over-the-counter or OTC

contracts. A legal reserve of EUR 202 million is held for the

unrealised fair value movements of these contracts (2018:

EUR 405 million).

In addition, a legal reserve participations of EUR 28 million

(2018: EUR 31 million) is recognised. The legal reserve

participations includes the increases in net asset value

of joint ventures and associates since their first inclusion,

less any amount that can be distributed without legal

restrictions.

The Legal reserve is not freely distributable.

Note 8 Provisions

Note 9 Interest-bearing liabilities

The maturity of interest-bearing liabilities can be specified

as follows:


2019 2018

Balance brought forward 40 46

Reversed provisions - 5 - 11

Provisions for the period 9 16

Provisions used - 7 - 11

Balance carried forward 37 40

Current portion 13 16

Non-current portion 24 24

Short-term part Long-term part

2019 2018 2019 2018

Leasing liabilities 8 - 18 -

Total 8 - 18 -

The provisions relates to personnel-related provisions for

non-pension purposes and other provisions,

Personnel-related provisions for non-pension purposes

Provisions are made for future costs pertaining to:

• Long-term time accounts. This covers the obligation

to continue paying all or part of an employee’s salary

during the first two years of sick leave.

• Jubilee payments. This covers the jubilee benefits paid

to employees for every 10 years of service and after

retiring upon reaching the retirement age.

• Severance payments related to restructuring measures.

This covers payments and/or supplements to benefits

granted to employees whose employment contract

has been terminated. These benefits and supplements

are based on the Social Plan operated by Vattenfall NV

and individual arrangements (including Voluntary Leave

Package).

• Other costs for giving notice to personnel.

Other provisions

Other provisions include provisions for restructuring.

Note 10 Contingent liabilities

Reference is made to Note 30 to the consolidated

accounts, Contingent liabilities.



Supervisory Board

Magnus Hall

Anne Gynnerstedt

Jan Haars

Management Board

Martijn Hagens

2019

Dividend

Dividend Vattenfall AB -

Total dividend to be distributed -

Result after taxation - 214

Dividend proposal: Dividend to be distributed -

Amount to be subtracted from other reserves - 214

Note 11 Other income less expenses after taxation

Other income less expenses after taxation was EUR 1

million postive (2018: EUR 2 million positive) and consists

mainly of income and expenses of company-wide activities

at holding company level.

Note 12 Number of employees

The average number of employees in 2019 was 459 FTE

based on a 38-hour working week (2018: 480 FTE), of

which working in foreign countries 6 FTE (2018: 8 FTE).

The employee benefits related to the members of the

Management Board have been disclosed in Note 31 to

the consolidated accounts, Number of employees and

personnel costs.

Note 13 Events after the balance sheet date

For subsequent events, see Note 33 to the consolidated

accounts, Events after the balance sheet date.

Note 14 Proposed result appropriation

In accordance with the Articles of Association and the

dividend policy, the Management Board, after consulting

the Supervisory Board, proposes to distribute EUR 0 million

to the shareholder and to subtract EUR 214 million from

other reserves.



Report on the audit of the financial statements 2019 included in the annual report

Our opinion

We have audited the financial statements 2019 of Vattenfall

N.V., based in Amsterdam. The financial statements include

the consolidated financial statements and the company

financial statements.

In our opinion:

• The accompanying consolidated financial statements

give a true and fair view of the financial position of

Vattenfall N.V. as at 31 December 2019, and of its

result and its cash flows for 2019 in accordance with

International Financial Reporting Standards as adopted

by the European Union (EU-IFRS) and with Part 9 of

Book 2 of the Dutch Civil Code.

• The accompanying company financial statements give

a true and fair view of the financial position of Vattenfall

N.V. as at 31 December 2019, and of its result for 2019

in accordance with Part 9 of Book 2 of the Dutch Civil

Code.

The consolidated financial statements comprise:

• The consolidated balance sheet as at 31 December

2019.

• The following statements for 2019: the consolidated

income statement, the consolidated statements of

comprehensive income, changes in equity and cash

flows.

• The notes comprising a summary of the significant

accounting policies and other explanatory information.

The company financial statements comprise:

• The company balance sheet as at 31 December 2019.

• The company income statement for 2019.

• The notes comprising a summary of the accounting

policies and other explanatory information.

Basis for our opinion

We conducted our audit in accordance with Dutch

law, including the Dutch Standards on Auditing. Our

responsibilities under those standards are further described

in the “Our responsibilities for the audit of the financial

statements” section of our report.

We are independent of Vattenfall N.V. in accordance

with the Wet toezicht accountantsorganisaties (Wta,

Audit firms supervision act), the Verordening inzake

de onafhankelijkheid van accountants bij assurance

opdrachten (ViO, Code of Ethics for Professional

Accountants, a regulation with respect to independence)

and other relevant independence regulations in the

Netherlands. Furthermore we have complied with the

Verordening gedrags- en beroepsregels accountants

(VGBA, Dutch Code of Ethics).

We believe the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter relating to uncertainty about Corona and going concernThe developments surrounding the Corona (Covid-19)

virus have a profound impact on people’s health and on

our society as a whole, as well as on the operational and

financial performance of organizations and the assessment

of the ability to continue as a going concern. The financial

statements and our auditor’s report thereon reflect

the conditions at the time of preparation. The situation

changes on a daily basis giving rise to inherent uncertainty.

Vattenfall N.V. is confronted with this uncertainty as well,

that is disclosed in the report of the management board

(see page 16), and the disclosure about events after the

reporting period (see page 50). We draw attention to these

disclosures. Our opinion is not modified in respect of this

matter.

Report on other information included in the annual reportIn addition to the financial statements and our auditor’s

report thereon, the annual report contains other information

that consists of:

• The report of the management board.

• Other information as required by Part 9 of Book 2 of the

Dutch Civil Code.

• Other statements.

Based on the following procedures performed, we conclude

that the other information:

• Is consistent with the financial statements and does not

contain material misstatements.

• Contains the information as required by Part 9 of Book 2

of the Dutch Civil Code.

We have read the other information. Based on our

knowledge and understanding obtained through our

audit of the financial statements or otherwise, we have

considered whether the other information contains material

misstatements. By performing these procedures, we

comply with the requirements of Part 9 of Book 2 of the

Dutch Civil Code and the Dutch Standard 720. The scope

of the procedures performed is substantially less than

the scope of those performed in our audit of the financial

statements.

Independent auditor's reportTo: the shareholder and the supervisory board of

Vattenfall N.V.

Other Information

Other information


Management is responsible for the preparation of the

other information, including the management report in

accordance with Part 9 of Book 2 of the Dutch Civil Code

and other information as required by Part 9 of Book 2 of the

Dutch Civil Code.

Description of responsibilities for the financial statementsResponsibilities of management and the supervisory

board for the financial statements

Management is responsible for the preparation and fair

presentation of the financial statements in accordance

with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code.

Furthermore, management is responsible for such internal

control as management determines is necessary to enable

the preparation of the financial statements that are free

from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements,

management is responsible for assessing the company’s

ability to continue as a going concern. Based on the

financial reporting frameworks mentioned, management

should prepare the financial statements using the going

concern basis of accounting unless management either

intends to liquidate the company or to cease operations,

or has no realistic alternative but to do so. Management

should disclose events and circumstances that may cast

significant doubt on the company’s ability to continue as a

going concern in the financial statements.

The supervisory board is responsible for overseeing the

company’s financial reporting process.

Our responsibilities for the audit of the financial

statements

Our objective is to plan and perform the audit engagement

in a manner that allows us to obtain sufficient and

appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute,

level of assurance, which means we may not detect all

material errors and fraud during our audit.

Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial

statements. The materiality affects the nature, timing and

extent of our audit procedures and the evaluation of the

effect of identified misstatements on our opinion.

We have exercised professional judgment and have

maintained professional skepticism throughout the audit,

in accordance with Dutch Standards on Auditing, ethical

requirements and independence requirements. Our audit

included among others:

• Identifying and assessing the risks of material

misstatement of the financial statements, whether

due to fraud or error, designing and performing audit

procedures responsive to those risks, and obtaining

audit evidence that is sufficient and appropriate

to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud

is higher than for one resulting from error, as fraud

may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

• Obtaining an understanding of internal control relevant

to the audit in order to design audit procedures that

are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness

of the company’s internal control.

• Evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates

and related disclosures made by management.

• Concluding on the appropriateness of management’s

use of the going concern basis of accounting, and

based on the audit evidence obtained, whether

a material uncertainty exists related to events or

conditions that may cast significant doubt on the

company’s ability to continue as a going concern. If

we conclude that a material uncertainty exists, we are

required to draw attention in our auditor’s report to the

related disclosures in the financial statements or, if such

disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained

up to the date of our auditor’s report. However, future

events or conditions may cause a company to cease to

continue as a going concern.

• Evaluating the overall presentation, structure and

content of the financial statements, including the

disclosures.

• Evaluating whether the financial statements represent

the underlying transactions and events in a manner that

achieves fair presentation.

Because we are ultimately responsible for the opinion,

we are also responsible for directing, supervising and

performing the group audit. In this respect we have

determined the nature and extent of the audit procedures

to be carried out for group entities. Decisive were the size

and/or the risk profile of the group entities or operations. On

this basis, we selected group entities for which an audit or

review had to be carried out on the complete set of financial

information or specific items.

We communicate with the supervisory board regarding,

among other matters, the planned scope and timing of the

audit and significant audit findings, including any significant

findings in internal control that we identify during our audit.

We provide the supervisory board with a statement that

we have complied with relevant ethical requirements

Other information

Vattenfall NV Annual Report 2019 60 Other information

regarding independence, and to communicate with them

all relationships and other matters that may reasonably

be thought to bear on our independence, and where

applicable, related safeguards.

Rotterdam, 15 May 2020

Ernst & Young Accountants LLP

Signed by

A.A. Heij


Assurance report of the independent auditor To: the shareholder and the supervisory board of Vattenfall

N.V.

Our opinion

We have performed a reasonable assurance engagement

on the graphs relating to the Fuel Mix of electricity supplied

and/or produced marked with “RA-verified” (hereinafter:

the Fuel Mix) in the annual report 2019 of Vattenfall N.V.

(hereinafter: Vattenfall NV).

In our opinion, the Fuel Mix is prepared, in all material

respects, in accordance with the guidelines of EnergieNed

on the calculation method of the Fuel Mix as established in

2004 and prescribed by the Autoriteit Consument en Markt

– ACM (hereinafter: the EnergieNed guidelines).

Basis for our opinion

We have performed our assurance engagement on the

Fuel Mix in accordance with Dutch law, including Dutch

Standard 3000A, “Assurance-opdrachten anders dan

opdrachten tot controle of beoordeling van historische

financiële informatie (attest-opdrachten)’’ (Assurance

engagements other than audits or reviews of historical

financial information [attestation engagements]). Our

responsibilities under this standard are further described

in the section Our responsibilities for the assurance

engagement on the Fuel Mix.

We are independent of Vattenfall NV in accordance

with the Verordening inzake de onafhankelijkheid van

accountants bij assurance-opdrachten (ViO, Code of Ethics

for Professional Accountants, a regulation with respect

to independence) and other relevant independence

regulations in the Netherlands. This includes that we do

not perform any activities that could result in a conflict of

interest with our independent assurance engagement.

Furthermore, we have complied with the Verordening

gedrags- en beroepsregels accountants (VGBA, Dutch

Code of Ethics).

We believe that the assurance evidence we have obtained

is sufficient and appropriate to provide a basis for our

opinion.

Reporting criteria

The Fuel Mix needs to be read and understood together

with the reporting criteria. Vattenfall NV is solely responsible

for selecting and applying these reporting criteria, taking

into account applicable law and regulations related to

reporting.

The reporting criteria used for the preparation of the Fuel

Mix are the EnergieNed guidelines.

Limitations to our assurance engagement

Our assurance engagement is restricted to the Fuel Mix. We

have not performed assurance procedures on any other

information as included in the annual report 2019 in light

of this assurance engagement. The Fuel Mix is presented in

the chapter Operational Performance in the annual report

2019. The data relating to the Fuel Mix on which we provide

assurance are labelled as “RA-verified” in the annual report

2019.

The quantification of CO2 emission factors as used in

the Fuel Mix is subject to inherent uncertainty due to the

designed capability of measurement instrumentation and

testing methodologies and incomplete scientific knowledge

used in the determination of emissions factors and global

warming potentials.

Responsibilities of the managing board and the

supervisory board

The managing board is responsible for the preparation of

the Fuel Mix in accordance with the EnergieNed guidelines.

The managing board is also responsible for such internal

control as the managing board determines is necessary

to enable the preparation of the Fuel Mix that is free from

material misstatement, whether due to fraud or errors.

The supervisory board is responsible for overseeing the

reporting process of Vattenfall N.V.

Our responsibilities for the assurance engagement on

the Fuel mix

Our responsibility is to plan and perform the reasonable

assurance engagement in a manner that allows us to

obtain sufficient and appropriate evidence for our opinion.

Our reasonable assurance engagement has been

performed with a high, but not absolute, level of assurance,

which means we may not have detected all material errors

and fraud.

We apply the Nadere voorschriften kwaliteitssystemen

(NVKS, Regulations for Quality management systems) and

accordingly maintain a comprehensive system of quality

control including documented policies and procedures

regarding compliance with ethical requirements,

professional standards and other applicable legal and

regulatory requirements.

We have exercised professional judgement and have

maintained professional skepticism throughout the

assurance engagement, in accordance with the

Dutch assurance standards, ethical requirements and

independence requirements.

Other information


The procedures of our assurance engagement included

amongst others:

• Evaluating the appropriateness of the reporting criteria

used and their consistent application. This includes the

evaluation of the reasonableness of estimates made by

the managing board.

• Obtaining an understanding of the systems and

processes for collecting, reporting and consolidating

the information in the Fuel Mix, including obtaining

an understanding of internal control relevant to our

assurance engagement, but not for the purpose of

expressing an opinion on the effectiveness of the

company’s internal control.

• Identifying and assessing the risks of material

misstatement of the Fuel Mix, whether due to fraud or

errors. Designing and performing further assurance

procedures responsive to those risks, and obtaining

assurance evidence that is sufficient and appropriate to

provide a basis for our opinion.

The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from

errors, as fraud may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of

internal control. These further procedures consisted

amongst others of:

• Interviewing relevant staff responsible for providing

the information in the Fuel Mix, carrying out internal

control procedures on the data and consolidating

the data in the Fuel Mix

• Reconciling the overall mix of conventional

electricity and the emission factors for import and

trade in the Netherlands as published by the ACM

with the figures used in the calculation of the Fuel

mix

• Obtaining assurance information that the Fuel Mix

reconciles with underlying records of the company

• Evaluating relevant internal and external

documentation, on a test basis, to determine the

reliability of the information in the Fuel Mix such as:

• The production of conventional and

renewable electricity

• Conventional and green electricity (the latter

based on Guarantees of Origin from CertiQ)

supplied to end customers

• Purchased conventional electricity

• Imported conventional electricity

• Centralized purchased conventional

electricity on the APX

• Performing an analytical review of the data and

trends submitted for consolidation at corporate level

Rotterdam, 15 May 2020

Ernst & Young Accountants LLP

Signed by

R.T.H. Wortelboer

Other information

Vattenfall NV Annual Report 2019 63 Other information

Declaration of Compliance with the Code of Conduct for Suppliers and Metering companies operating under their responsibility (hereafter: Code of Conduct for energy suppliers and

metering companies)

Regarding data available through small-scale consumption

metering devices which are read remotely.

Name legal entity: Vattenfall Sales Nederland N.V.

Statutory place of business: Amsterdam

Period: 1 January 2019 – 31 December 2019

Vattenfall Sales Nederland N.V. in Amsterdam uses data

obtained from small-scale consumption metering devices

which are read remotely with the purpose to provide a good

performance of its services. In addition to the General Data

Protection Legislation (“GDPR”), suppliers and metering

companies operating under their responsibility in the Dutch

energy sector, set up a Code of Conduct on the use, the

capturing, the sharing and the storing of data obtained from

small scale consumption measuring devices which are read

remotely.

We hereby confirm that Vattenfall Sales Nederland N.V.

in Amsterdam has fully complied with the rules and

obligations as set out in the Code of Conduct for energy

suppliers and metering companies during 2019.

Name legal entity: DELTA Energie B.V.

Statutory place of business: Middelburg


DELTA Energie B.V. in Middelburg uses data obtained from

small-scale consumption metering devices which are read

remotely with the purpose to provide a good performance

of its services. In addition to the General Data Protection

Legislation (“GDPR”), suppliers and metering companies

operating under their responsibility in the Dutch energy

sector, set up a Code of Conduct on the use, the capturing,

the sharing and the storing of data obtained from small

scale consumption measuring devices which are read

remotely.

We hereby confirm that DELTA Energie B.V. in Middelburg

has fully complied with the rules and obligations as set out

in the Code of Conduct for energy suppliers and metering

companies during 2019.

Name legal entity: powerpeers B.V.

Statutory place of business: Amsterdam


Powerpeers B.V. in Amsterdam uses data obtained from

small-scale consumption metering devices which are read

remotely with the purpose to provide a good performance

of its services. In addition to the General Data Protection

Legislation (“GDPR”), suppliers and metering companies

operating under their responsibility in the Dutch energy

sector, set up a Code of Conduct on the use, the capturing,

the sharing and the storing of data obtained from small

scale consumption measuring devices which are read

remotely.

We hereby confirm that powerpeers B.V. in Amsterdam has

fully complied with the rules and obligations as set out in

the Code of Conduct for energy suppliers and metering

companies during 2019.


Signed by

Martijn Hagens


Annual Statement 2019 in the framework of the Heat Act

IntroductionHeat supply company Vattenfall Warmte N.V. (VF Warmte,

formerly known as N.V. Nuon Warmte) is part of the energy

production and supply company Vattenfall NV.

Shareholders as at 31 December 2019The shares of VF Warmte are fully owned by Vattenfall

Energy Sourcing Netherlands N.V., a 100% subsidiary of

Vattenfall NV. From 1 July 2015 the Swedish state-owned

Vattenfall AB owns 100% of the shares of Vattenfall NV.

Supply areasVF Warmte manages and operates large-scale heat

networks in the provinces Gelderland, Flevoland, Noord-

Holland and Zuid-Holland.

LicenseBased on the Heat Act, heat suppliers are required to

register heating networks with the Authority Consumer &

Market (ACM) and apply for a permit for the supply of heat

at the ACM. On 8 March 2016 the permit has been granted

by the ACM.

TasksThe tasks of VF Warmte, which are based on the

Warmtewet 2014 (Heat Act) and underlying ministerial

regulations and decisions, have a regulated character

and include: The distribution and delivery of heat to

consumers with a connected load of up to 100kW at a

legally established maximum price; ensuring the safety and

reliability of the networks and connections.

Annual statementThis annual statement has been prepared based on the

Heat act and the underlying ministerial regulations and

decisions, which require to prepare separate financial

information for each heat supply company as per 1 January

2014. Furthermore, these regulations require heat supply

companies to publish an annual statement of their financial

information. With this annual statement VF Warmte

endorses this obligation.

The accounting policies and principles used in the annual

statement are in accordance with the 2019 financial

statements of Vattenfall NV and only includes the financial

information of the operation of VF Warmte to which the

regulation of the Heat Act applies, as VF Warmte also

supplies non-regulated heat (supply of heat to consumers

with a connected load capacity above 100kW). VF Warmte

uses several allocation keys to allocate the total costs of VF

Warmte to the regulated and non-regulated supply of heat.

Variable purchase costs are allocated to the regulated and

non-regulated activities based on the relative number of GJ

sold to both customer groups. Fixed purchase costs and

other costs are allocated based on the relative number of

connections or the relative capacity of the connections.

The financial position and performance of VF Warmte have

been included in the consolidated financial statements

of Vattenfall NV. EY has issued an audit opinion on

the consolidated financial statements of Vattenfall NV

(see page 58). Based on Article 2 403 BW VF Warmte

is exempted from publishing independent financial

statements. In relation to this, a liability statement as

referred to in Article 2: 403 BW, is filed at the Dutch

Chamber of Commerce.

Financial information for 2019The tables below represent the financial information for

2019, as far as it concerns the regulated supply of heat

(heat to consumers with a connected load of up to 100kW).

Other information


Income statement heat-supply

Balance sheet information heat-supply

Other information

Amounts in EUR million 31-dec-19 31-dec-18

Property, plant and equipment 406.5 308.0 *

Construction contributions -169.3 -159.7

* As per 1 January 2019, a lease liability and right-of-use asset is recognised for leases in accordance with IFRS 16, that were previously classified as operating leases

through application of IAS 17. In the income statement, the lease expenses is replaced by depreciation of the right-of-use asset and interest expense on the lease

liability. Reference is made to Note 3 for more detailed information.


Heating revenue 119.3 110.8

Amortisation construction contributions 6.9 6.6

Other net sales 38.6 37.5

Net sales 164.8 154.9

Heating cost of purchases -45.7 -41.4

Other cost of purchases -29.3 -27.7

Other external expenses -37.5 -39.1 *

Personnel expenses -22.4 -20.3

Other operating incomes and expenses, net -0.5 -0.2

Operating profit before depreciation, amortisation and impairment losses (EBITDA)

29.4 26.2

Depreciation -23.8 -13.8 *

Operating profit (EBIT) 5.6 12.4


Explanation to the income statement

VF Warmte conducts transactions with subsidiaries of

Vattenfall NV for the purchase of heat. Transactions with the

parties classified as related parties are conducted at market

conditions and prices that are not more favourable than the

conditions and prices offered by independent external third

parties. The transaction price for the purchase of heat from

related parties is determined semi-annually in advance,

based on forecasted commodity prices and related plant

utilisation. The list with purchase contracts includes the

significant subsidiaries VF Warmte has transactions with. In

addition VF Warmte receives internal charges for services

delivered by related parties within the Vattenfall group.

Other information

VF Warmte performs construction activities and

exploitation services for third parties. Revenues and costs

related to these activities are part of the presented income

statement as ‘Other net sales’ and ‘Other cost of purchases’.

The margin resulting from the work for third parties is part

of the regulatory activities and contributes to the coverage

of overhead expenses.


Breakdown of heating revenue 119.3 110.8

a1. Heat consumption 67.5 61.3

a2. Hot water consumption 6.4 6.2

b1. Fixed fee heat supply and metering services 29.8 28.1

b2. Delivery kit 15.6 15.2

Breakdown of cost of purchases -45.7 -41.4

Variable heat purchase costs -22.2 -19.8

Fixed heat purchase costs -22.0 -20.0

Cold water purchase costs -0.8 -0.9

Electricity purchase costs -0.7 -0.7

Supplies

Amount of heating supplied in GJs 3,175,221 3,165,980

Number of connections (<100 kW) 122,082 118,505

Amount of hot water supplied in m3 1,102,719 1,180,061

Purchase

Purchased heat in GJ 4,783,376 4,759,004

Purchased cold water in m3 1,102,719 1,180,061

Purchase contracts according to Heat Act article 8 14 14

Vattenfall Power Generation B.V. Production and transport of heat Production and transport of heat

Stichting VU Production of heat Production of heat

Vattenfall Warmte N.V. department Generation Operations Production of heat Production of heat

Vattenfall Duurzame Energie N.V. Production of heat Production of heat

AVR Afvalverwerking B.V. Production of heat Production of heat

Eneco Warmte en Koude Leveringsbedrijf B.V. Production and transport of heat Production and transport of heat

Veolia Industriediensten B.V. Production of heat Production of heat

ARN B.V. Production of heat Production of heat

Indigo B.V. Transport of heat Transport of heat

Bio-Energie de Vallei B.V. Production of heat Production heat

Bio-Warmte de Vallei B.V. Transport of heat Transport of heat

Primco BMC Lelystad B.V. Production of heat Production heat

Warmtebedrijf Infra N.V. Production and transport of heat Production and transport of heat

Uniper Benelux N.V. Production of heat Production of heat


Profit appropriation

Profit appropriation is governed by the Articles of

Association of Vattenfall NV, which state that the authority

to decide over the allocation of profits determined by the

adoption of the annual accounts and to make distributions

is vested in the General Meeting of Shareholders, with due

observance of the limitations prescribed by law.

Other information

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